S&P Global Ratings has revised its outlook on Japan-listed gaming and entertainment group Universal Entertainment Corp to “negative” from “stable”, while affirming its long-term issuer credit rating at “B-”.
The credit ratings agency cited continued weak performance at the Okada Manila casino resort in the Philippines, controlled by the Japanese group’s unit, Tiger Resort, Leisure and Entertainment Inc.
S&P said in a Monday memo that the downturn in the group’s casino resort segment was “highly likely to continue”, pointing to intense competition in the Philippine market and inflationary pressure linked to the conflict in the Middle East.
The institution lowered its estimate for annual earnings before interest, taxation, depreciation, and amortisation (EBITDA) contribution from the casino operation to around JPY10 billion (US$62.9 million) for the current fiscal year, similar to the prior year, and versus an earlier projection of JPY15 billion to JPY16 billion.
In December, S&P downgraded Universal Entertainment’s rating to ‘B-’, from ‘B’, on “prospects of slow recovery”.
The weaker outlook flagged in Monday’s report follows what S&P described as a significant impairment recognised by Universal Entertainment in fiscal 2025, amounting to approximately JPY220 billion, amid difficult operating conditions at the casino resort business.
The ratings agency noted that improvement in the conglomerate’s Japan-based pachinko and pachislot machine operations was unlikely to fully offset the softness in the Philippine resort business.
Earlier this month, Universal Entertainment acknowledged that the Philippine gaming market continued to “face structural headwinds,” as the property’s first-quarter results “fell short” from a year earlier.
“We recognise that the gaming market in Entertainment City, Manila, Philippines, remains in a period of adjustment,” the parent said in its first-quarter earnings report.
“Against the backdrop of structural changes in the VIP market, fierce competition with rivals to acquire mass-market customers continues, driving up customer acquisition costs,” it added.
In mid-April, the promoter of Okada Manila said the complex recorded casino gross gaming revenue (GGR) of just under PHP6.47 billion (US$108.1 million) in the first three months of 2026, down 17.2 percent year-on-year.
The casino resort launched the “Okada Play” online gaming platform this month in partnership with gaming technology provider PhilWeb Corp.
The complex also announced the opening of “Ariake”, described as an exclusive gaming club designed specifically for Japanese VIP guests. The new gaming venue forms part of the resort’s strategy to strengthen its appeal to international premium players, the company noted.
In Monday’s memo, S&P’s analysts Kei Ishikawa and Hiroyuki Nishikawa wrote: “We believe the debt burden will remain very heavy due to weak companywide performance.”
According to the analysts, Universal Entertainment’s leverage profile remains stretched, with the analysts forecasting debt-to-EBITDA at around 10 times this year, compared with more than 11 times in fiscal 2025.
The institution also flagged the possibility of pressure on liquidity, despite cash and deposits rising to about JPY40 billion at end-2025 following additional borrowings by the Philippine subsidiary.
According to S&P, annual interest expense is running at roughly JPY15 billion, while capital renewal spending at the Philippine resort could reach around JPY9 billion per year.
The analysts stated: “We therefore estimate that free operating cash flow will likely remain negative, and cash and deposits on hand are likely to further decline.”
Despite the negative outlook, S&P said near-term liquidity pressure appeared manageable, with less than JPY5 billion of debt maturing over the next 12 months from total long-term borrowings exceeding JPY130 billion.
The ratings agency said it could downgrade Universal Entertainment’s rating if cash flow recovery fails to materialise, particularly if free operating cash flow remains negative or consolidated cash falls below JPY25 billion.
Conversely, the outlook could return to stable should profitability improve materially across both gaming machines and casino operations, accompanied by stronger liquidity and positive free cash generation.
