DigiPlus has room to take on more debt for growth — Moody’s

DIGIPLUS INTERACTIVE Corp. has room to take on additional debt to fund its expansion while maintaining relatively low leverage, Moody’s Ratings said as it assigned the gaming company a first-time B1 corporate family rating with a stable outlook. Moody’s said DigiPlus’ target of keeping net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) below three times indicates the company has the capacity and willingness to take on additional debt for growth. The rating agency expects DigiPlus’ leverage to remain below 0.5 times over the next 12 to 18 months, provided the company does not undertake significant acquisitions or investments. “DigiPlus’ B1 rating reflects its leadership in the Philippines’ online gaming market and strong financial profile, underpinned by low leverage, robust cash generation and a net cash position,” Moody’s Ratings Assistant Vice-President Yu Sheng Tay said in a statement e-mailed to journalists on Thursday. Moody’s said DigiPlus had P10.5 billion in cash and cash equivalents as of June 30 and was in a net cash position. The company’s cash balance, together with projected operating cash flow of P19.5 billion, should be sufficient to cover P7.6 billion in capital spending, P1.3 billion in scheduled debt maturities, and P4.2 billion in shareholder returns through December 2027, according to the rating agency. DigiPlus is expanding into land-based casinos and overseas gaming markets, including Brazil and South Africa, while also planning to apply for an online gaming license in New Zealand. Combined capital spending for its Brazil and South Africa expansion is expected at about P650 million over the next two years, Moody’s said. DigiPlus has also invested in convertible notes issued by International Entertainment Corp. (IEC), giving it the option to acquire majority control of IEC upon conversion. Moody’s said a conversion would increase DigiPlus’ exposure to IEC’s capital commitments through 2033 related to LaVie Resort & Casino Manila. The rating agency nevertheless flagged execution and financial risks tied to DigiPlus’ expansion into land-based casinos and overseas markets, as well as regulatory changes and competition in the Philippine online gaming sector. “These strengths are balanced by exposure to regulatory change and intense competition in the Philippines’ online gaming sector. DigiPlus’ growth ambitions in land-based casinos and overseas markets also introduce execution risk,” Mr. Tay said. Moody’s expects DigiPlus’ EBITDA to decline to about P11.4 billion this year from P14.3 billion in 2025. The agency attributed the expected decline to the central bank’s August 2025 directive requiring mobile wallet and payment providers to delink in-app access to online gaming platforms, as well as weaker consumer sentiment amid higher fuel prices and broader inflationary pressures. EBITDA is expected to recover to about P14 billion to P15 billion in 2027 and 2028, supported by organic growth and contributions from the consolidation of IEC and overseas investments, Moody’s said. Moody’s estimated that DigiPlus has a 38.5% share of the Philippine online gaming market and around six million monthly active users. The company operates more than 1,000 games across bingo, electronic gaming, and sports betting. The rating agency said tighter regulation could accelerate consolidation in the online gaming industry and favor larger incumbents with sufficient scale, financial resources, and the ability to adapt. “The stable outlook reflects our view that DigiPlus will maintain its leading position in the Philippines’ online gaming sector and grow its earnings over the next 12-18 months, adapt to evolving regulations, and execute its growth plans prudently,” Moody’s said. Moody’s said it could consider an upgrade if DigiPlus sustains its domestic market position, operates through periods of regulatory tightening without a significant deterioration in earnings or cash flow, and improves revenue diversification through successful expansion. A sustained debt-to-EBITDA ratio below three times could support an upgrade, while a ratio above 3.5 times could put downward pressure on the rating. “A nationwide prohibition on online gaming in the Philippines is likely to result in a multi-notch downgrade as online gaming accounts for most of DigiPlus’ revenue,” Moody’s said. Moody’s said the B1 rating is five notches below the Baa2 scorecard-indicated outcome, reflecting DigiPlus’ exposure to regulatory changes, relatively short operating track record, and growth appetite. DigiPlus shares fell 3.1% to P9.06 apiece on Thursday. — Alexandria Grace C. Magno