UBS: Lower NAGACORP (03918) target price to 6.4 Hong Kong dollars, signs of recovery in VIP business demand.

UBS released a research report stating that NAGACORP (03918) performed as expected in the second half of last year, but faced pressure on VIP business demand due to the impact of the crackdown on fraud centers and the tense situation at the Thailand-Cambodia border. Management indicated that VIP business demand has started to recover after the ceasefire agreement in December, and they plan to continue expanding their marketing team to attract international customers this year. In addition, foreign direct investment (FDI) continues to flow into Cambodia, and the upcoming visa-free policy between China and Cambodia is expected to drive demand from Chinese tourists. The bank maintained a "buy" rating with a target price lowered from 6.8 Hong Kong dollars to 6.4 Hong Kong dollars. The company expects capital expenditure of around $170 million by 2026, mainly for renovating Naga 1 and Naga 2, as well as introducing smart gaming table technology. Operating expenses are expected to increase in the low to mid-single digits, but management has not provided an updated development timeline or scale for Naga 3. Despite geopolitical turmoil, management expects limited impact on operations. The group will continue to adopt a cautious dividend policy to maintain financial flexibility to address risks and the final plan for Naga 3 and capital expenditure.