Brokerage Union Gaming Securities LLC says that if a pause in gaming operations in the Philippines is extended beyond June, the promoter of casino resort Okada Manila (pictured) could “substantially reduce the cash operating burn through more aggressive mitigation measures”.
The institution estimates Okada Manila’s current cash costs are about US$15 million per month while casino operations are paused. “With Manila shut down, all capital expenditure at the property has likely been suspended for now,” wrote analysts John DeCree and Sam Ghafir in a Thursday note.
The Philippine authorities announced last week the extension of their anti-coronavirus lockdown of the country’s main island Luzon until April 30. That also extends the period during which casino operations are paused in the large-scale, private-sector casino resorts in Manila’s Entertainment City zone.
Okada Manila is promoted by Tiger Resort, Leisure and Entertainment Inc, a unit of Universal Entertainment. The latter firm is also a major supplier to the Japanese domestic market for pachinko gaming machines.
Universal Entertainment said in a Wednesday statement that the current temporary shutdown of Okada Manila will result in a decrease in net sales of JPY15 billion (about US$139 million). The group also lowered its annual net sales forecast and its operating income forecast for its current fiscal year.
Okada Manila has “suspended operation of all or a part” of the facilities at the property since March 15. The scheme’s promoter said it expected the measures requiring the closure of Okada Manila could be further extended until mid-May, resulting effectively in a suspension of business at the property for an aggregate of two months.
The Union Gaming team said it estimated Universal Entertainment to have about US$200 million of liquidity in the Philippines as of the end of 2019. Such an amount “would provide over a year of liquidity if needed at our current estimated cash burn and even longer,” if additional cost-mitigation measures were implemented, stated the analysts.
“We are currently modelling a more conservative reopening on June 1 and expect a gradual ramp of operations, possibly with VIP returning first,” said the analysts. “It’s unclear when visa and travel restrictions across Asia will be relaxed, but the good news is that Okada Manila has a strong local customer base,” they added.
Okada Manila’s total March gross gaming revenue (GGR) was down by around 54 percent year-on-year, coinciding with the temporary closure of the property since March 15, according to figures released by the parent company.
