Hong Kong listed Nagacorp (HKSE 3018) has announced as per EGM held on Thursday, 8 August 2019, that all minority shareholders from all over the world, other than controlling shareholder Chen Lip Keong, who abstained from voting for good governance purposes, have given a resounding “Yes” to go-ahead with the US$3.5b mega project, Naga 3, the single largest private sector investment so far in Cambodia, if not in the Mekong region.
Soil investigation is scheduled to start imminently, by September, and together with Naga 1 and 2, will advance the company’s ambition to become the world’s largest riverine Integrated Resort in the world.
In April the company announced that its founder, NagaCorp chief executive Tan Sri Dr Chen Lip Keong, would pay half of the $3.5 billion price, excluding the cost of land.
Naga 3 extension will have a gross floor area of 544,801 square metres. It will feature an additional 4,720 hotel rooms to the NagaWorld Complex along with numerous state of the art multi-faceted entertainment facilities and convention centres.
The additional rooms will certainly help in meeting the need for adequate quality hotel rooms in the capital which is expected to have a shortfall of 100,000 rooms by 2025 (Ministry of Tourism) and by which only the Chinese visitation alone will be set to exceed 5.5 million arrivals.
The project also positions the group as another Integrated Resort powerhouse in Asia Pacific, further securing its footing in the competitiveness of the group.
Established in 1994, the resort has been well managed and since its IPO on October 2006, the group’s market capitalisation has grown more than 13 times to some $6 billion from $441 million
Rating agencies Moody’s Investors Service Inc and S&P Global Ratings Inc had rendered a positive outlook for Nagacorp.
S&P Global, meanwhile, said that it expects the project to enhance the company’s scale and operating performance without significantly straining its cash flow leverage.
Moody’s affirmed the B1 corporate family rating of Nagacorp in keeping with its dominant position of its integrated casino and hotel complex in Phnom Penh.
NagaCorp has also been rated one notch above Cambodia’s sovereign rating, based on Moody’s assessment of the low likelihood that NagaCorp would be affected in the event of a weakening of Cambodia’s economic fundamentals.
NagaCorp’s Chairman Tim McNally said that the Hong Kong-listed resort owner was in “a position to take a look” at new development opportunities if they are sufficiently attractive.
McNally also said additionally that the financing arrangement for Naga 3 showed “a lot of confidence and commitment from Dr Chen” both in the company and its growth potential.
NagaCorp filed plans for Naga 3 with the Hong Kong Stock Exchange in April.
With this new development phase, Cambodia is poised to become a regional multi-faceted entertainment hub rivaling Macau, Las Vegas, Singapore and the region because Cambodia is strategically located in the midst of East and South East Asia and hence with good increasing air connectivity, tourism has been growing by leaps and bounds
The investment of Naga 3 of about $3.5 billion, is a further endorsement of confidence in the political and economic climate of Cambodia. It gives an impression to investors all over the world that big businesses can prosper in Cambodia and that investors can be assured of the long term stability of the operating environment in Cambodia
NagaWorld group is already one of the biggest employer in the Cambodia. Naga 1 and Naga 2 are currently employing 8,600 employees. Naga 3 is three times the size of Naga 1 and Naga 2 combined and shall have 18,000 employees upon completion.
During the 6 years construction period of Naga3, Naga 3’s semi-permanent direct and indirect employees shall be about 50,000, covering the whole supply chain from service providers, suppliers to temporary construction workers, etc.
The Group has raised the international economic profile, attracted FDI, enhanced tourism and contributed to the socio-economic development of Cambodia. In 2018, the Group contributed approximately 23% of local GDP tourism growth and approximately 1.3% of national GDP in Cambodia (Source: MOEF classification of rooms and F&B compare with the Group’s 2018 Annual Report).
Current visitations to Naga1 and Naga 2 amount to about 15,000 per day or about 880,000 visitors per year. The addition of Naga 3 will increase the visitation by 330% (about 3 times the size of current Naga1 &2) or about 33,000 visitation’s per day or 2.9m visitors per year.
Since the committed incremental investment of Naga3 is USD 3.5b in capex to build 540,081 sq m. of space with about 4720 rooms, the estimated expenditure as a percentage of contribution to Cambodian GDP is about 10.9% (2018 contribution is about approximately 1.3% of national GDP in Cambodia) which is a significant number contributed singly by a member of the private sector
Project consultants to the projects were from United States , Hong Kong and Malaysia namely Steelman Partners (design architect/planner, interior designer); Dr Tan LM Architect (architect-of-record); Jacobs Engineering Services Sdn Bhd (civil and structural engineers); KWA Consult Sdn Bhd (mechanical & electrical engineers); and ELP Quantity Surveyors Sdn Bhd (quantity surveyor), adopting British and Malaysian specifications as a benchmark of international standard for the development and construction of Naga3 Project
The project appraiser is Hong Kong based Colliers International and financial advisers are Morgan Stanley Asia Ltd and Credit Suisse (Hong Kong) Ltd.