BofA Securities has issued a research report downgrading NagaCorp (03918) from "Neutral" to "Underperform," while cutting its target price by 30% to HK$3.1.

The brokerage believes that visibility on a recovery in the company's gaming revenue is limited, noting that gaming revenue growth has decelerated from 2.1% in the first quarter to a 20% decline in the second quarter and a 43% decline in the third quarter.

The bank attributes the revenue slowdown primarily to two factors. First, growth in Chinese customers has been weak. The bank estimates that approximately 50% of NagaCorp's gaming customers are Chinese nationals, and gaming spending may remain sluggish in the near term. Second, inbound tourist arrivals have declined, with Cambodia's inbound visitors falling 44% year-on-year in the first eight months of this year. The bank believes that ongoing safety concerns surrounding Cambodia could continue to limit the pace of recovery in inbound tourism.

Based on the decline in NagaCorp's third-quarter gaming revenue, the bank estimates third-quarter EBITDA at US$58 million, below its first-quarter and second-quarter forecasts of US$115 million and US$80 million, respectively.

Given the disappointing gaming revenue results, the bank has lowered its EBITDA forecasts for fiscal years 2026 and 2027 by 27% and 38%, respectively, to US$312 million and US$269 million.