CLSA sees turning point for Philippines gaming sector
Casino gross gaming revenue (GGR) in the Philippines continues to grow, being up 7 percent year-on-year in the three months to March 31, says brokerage CLSA Ltd.
“March GGR (-1 percent year-on-year; -6 percent quarter-on-quarter) held up well, despite the Easter lull hampering year-on-year comparisons,” said analyst Marcus Liu in a note this week. Easter, traditionally a period when punters shy away from gaming tables, fell in March this year, compared to April in 2015.
“Despite the unfavourable seasonality, GGR was still up 7 percent year-on-year in 2016 year-to-date, on track to meet our full-year target of 8 percent year-on-year growth,” said Mr Liu. “As a result of the early Easter, we expect April GGR to be up [about] 40 percent year-on-year.”
Accumulated casino GGR – including from venues managed by state-run Philippine Amusement and Gaming Corp (Pagcor) and those run by private sector operators – reached PHP130 billion (US$2.77 billion) for the full year of 2015, up by 17 percent compared to 2014, said in January the chairman of Pagcor, Cristino Naguiat.
CLSA said it expects Melco Crown (Philippines) Resorts Corp, operator of the City of Dreams Manila casino resort, to report the strongest first quarter result among the Philippines major casino operators.
The City of Dreams Manila project has three existing private sector rivals in the Manila market, that are all of international standard. They are: Resorts World Manila, opened in August 2009 and controlled by Travellers International Hotel Group Inc; Solaire Resort and Casino, developed and operated by Bloomberry Resorts Corp, and which opened in March 2013; and Manila Bay Resorts, operated by Universal Entertainment Corp, which is scheduled to open by the end of 2016.
“Melco Crown Philippines will likely deliver its strongest result since opening City of Dreams Manila,” said CLSA’s Mr Liu.
The brokerage said it expects the casino operator to report property earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$26 million, up by 56 percent quarter-on-quarter, driven by GGR growth of 22 percent sequentially.
Bloomberry Resorts is also likely to see an uptick in first quarter results. “With the bad debt decks now cleared at Solaire, 2016 should see much better earnings, with provisioning much lower. We expect EBITDA of PHP1.5 billion in first quarter 2016,” said the CLSA analyst.
Enrique Razon, chairman of Bloomberry Resorts, said in recent comments that the prospects for the company are “far better this year”, with “much lower costs… no more bad accounts, bad debt”.
Bloomberry Resorts reported on April 15 a PHP3.36-billion net loss for 2015. Provision for doubtful accounts rose nearly threefold last year, to nearly PHP2.57 billion, compared to PHP679.66 million in 2014.
Travellers International “has likely endured the worst first quarter 2016 out of the operators in our Philippines gaming coverage, with GGR likely to be down 20 percent year-on-year (-11 percent quarter-on-quarter),” said Mr Liu.
Resorts World Manila continues to lose market share to casino resorts in Entertainment City, added CLSA’s note. The brokerage however expects Travellers International’s margins “to hold up better with junket revenue sharing agreements declining”.
Junket promotional allowances weighed on the 2015 numbers, Travellers International said in its annual results filed in March.
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