Several companies with casino interests in the Philippines have been buying back shares at a time when their stocks have been undergoing Macau-like declines.
The latest announcement on Wednesday to the Philippine Stock Exchange by Belle Corp, for a small tranche of common shares is part of an exercise – authorised by its board – to purchase up to PHP1 billion (US$22.2 million) in stock.
Share buybacks typically have the effect of concentrating the value of existing shareholders, say investment analysts.
City of Dreams Manila, managed by Melco Crown (Philippines) Resorts Corp, is a partnership between casino operator Melco Crown Entertainment Ltd and Premium Leisure Corp, a unit of Belle, controlled by the family of Philippine billionaire Henry Sy. The resort has a capital expenditure budget of more than US$1 billion.
Bloomberry Resorts Corp, which developed and operates Solaire Resort and Casino in Manila – described as a US$1.2-billion property – said in a filing to the Manila bourse on June 10 that it had bought back 4.5 million shares since the start of a share repurchase programme on June 5.
Shares of Bloomberry Resorts have lost 27 percent this year, and Resorts World Manila operator Travellers International Hotel Group Inc has slumped 35 percent, stated Bloomberg on Wednesday.
“Melco Crown (Philippines) Resorts Corp tumbled 56 percent as earnings disappointed investors, outpacing even the 36 percent loss at Wynn Macau Ltd, the Chinese territory’s worst-performing casino stock,” noted Bloomberg.
Global contagion
One factor is that VIP and other high stakes gamblers that have forsaken Macau reportedly in the wake of China’s anti-corruption campaign haven’t always gone to Manila and other Asian markets.
Morgan Stanley Research analysts led by Praveen Choudhary estimated in a report on June 5 that the global market for VIP gambling shrank 42 percent year-on-year and 18 percent quarter-on-quarter during the three months to March 31. The deterioration was led by – but was not exclusive to – Macau, said the Morgan Stanley team.
And those players and junkets that are going to places such as Manila are either driving a hard bargain or in some cases costing the house money.
In the first quarter, Bloomberry Resorts reported a 100 percent increase in allowance for “doubtful accounts”. The aggregate of such receivables – mostly from casino operations – rose to approximately PHP1.59 billion from approximately PHP789.08 million from the prior-year period.
The challenging operating environment is not limited to Macau and Manila.
Analysts at Sanford C. Bernstein led by Vitaly Umansky mentioned in a note on Tuesday there had been reports of a crackdown by Chinese authorities last week on some travel agencies in Beijing that promote South Korean casinos to mainland gamblers. Reports said 14 suspected marketers and some suspected gamblers were arrested for allegedly promoting gambling and violating foreign currency control laws in China.
“In addition, we believe the Chinese government’s crackdown also targets local tour agencies that help gamblers apply for a foreign visa. We believe the crackdown reflects that the Chinese government will not allow foreign casinos to scout Chinese VIP players on the back of regulatory arbitrage in favour of neighbour[ing] countries (including the Philippines and Korea).”
Philippines’ moment
The Sanford Bernstein team added: “In the near-term, the Philippines may also have some favourable regulatory environment which allows proxy betting, Internet interactive gambling, and low tax rate that enables casinos to offer competitive junket commissions. However, we do not expect such regulatory arbitrage for the purpose of luring Chinese VIP players to persist over the long-run,” said the brokerage, referring firstly to telephone betting done from outside the casino by high stakes players – some if which is said by analysts to have migrated from Macau.
In May, Tom Arasi, president and chief operating officer of Bloomberry Resorts, said the ongoing slump in casino gaming revenue in Macau was not good news for other Asian gaming jurisdictions.
“The challenges here [in Macau] and the challenges in the China market having business going [elsewhere] – whether it is to [Las] Vegas or Australia, whether it is to Vietnam, whether it is to [South] Korea – those challenges don’t help anyone in the industry,” he said at a conference session of Global Gaming Expo (G2E) Asia in Macau.
Melco Crown Philippines, which only officially opened City of Dreams Manila on February 2, did not declare a dividend in 2014. Premium Leisure declared a cash dividend to shareholders of PHP0.022 per share on its 2014 results.
Bloomberry Resorts Corp, which opened Solaire in March 2013, declared a dividend of PHP0.05 per share on its full-year 2014 accounts.
Travellers International, which had a first phase opening for Resorts World Manila in 2009, declared a cash dividend of PHP0.07 per share equivalent to PHP1.1 billion, or 20 percent on its net profit, in 2014.
