Japanese gaming conglomerate Universal Entertainment Corp says its net sales in the first nine months of 2019 rose by 39.5 percent, to just above JPY93.48 billion (US$855.8 million). Such growth was boosted by an increase in sales at the Okada Manila casino resort (pictured) in the Philippines, which grew by 46.7 percent year-on-year to nearly JPY49.61 billion, the group said in a Tuesday filing to the Tokyo Stock Exchange.
Universal Entertainment’s subsidiary Tiger Resort, Leisure and Entertainment Inc operates the Okada Manila casino resort. The property opened on December 21, 2016 in what management referred to as a “preview period”. An official launch for the property took place in early 2017, and the business has been ramping up over the years with the addition of hotel rooms and an increase in casino sales.
In Tuesday’s filing, the parent company said that the development of a land plot adjacent to the casino resort had been completed with the aim of a foray into the real estate business. The new business segment was being developed “in response to the steady expansion … of the casino business,” and will be part of the group’s integrated resort segment, said Universal Entertainment. The company did not provide specifics on the real estate business.
Universal Entertainment said it planned to launch “several joint ventures” to pursue the real estate business, adding that it was currently engaged in “discussions with multiple candidates”. “This [real estate business] will strive to strengthen the profitability of … [the] integrated resort business,” said the Japanese conglomerate.
Universal Entertainment reported an operating profit of nearly JPY1.39 billion in the nine months to September 30, compared to an operating loss of JPY14.48 billion a year earlier. The group’s casino resort business narrowed its operating loss to approximately JPY1.84 billion for the reporting period, compared with nearly JPY4.78 billion a year earlier.
Universal Entertainment – which also has interests in pachinko machine manufacturing – reported adjusted segment earnings before interest, taxation, depreciation and amortisation (EBITDA) of nearly JPY21.04 billion in the first nine months of 2019, 938 percent higher than in the comparable period a year ago.
The casino resort business saw its adjusted segment EBITDA soar to nearly JPY9.06 billion, from just above JPY1.37 billion a year earlier. Adjusted segment EBITDA in the pachinko sector stood at JPY11.42 billion, compared to a loss of JPY215 million a year earlier.
Universal Entertainment reported a group-wide net loss of approximately JPY5.74 billion in the nine months ended September 30, compared to a net profit of JPY167.97 billion a year earlier. Such profit for the year-ago period included money from a compensation settlement worth US$2.4 billion paid by casino group Wynn Resorts Ltd to settle a stock redemption dispute.
Brokerage Union Gaming Securities LLC said in a Tuesday memo that Universal Entertainment posted “a nice beat” in the third quarter, “predominantly driven” by the pachinko segment and by a “strong performance” of Okada Manila.
The parent company said that the non-consolidated results from Tiger Resort, Leisure and Entertainment showed that Okada Manila’s third-quarter gross gaming revenue (GGR) rose by 48.9 percent year-on-year, to PHP10.28 billion (US$202.3 million). Revenue from the VIP segment rose by 63.3 percent year-on-year, to PHP4.88 billion in the three months to September 30, and GGR from the mass-market table segment grew by 41.2 percent, to nearly PHP2.51 billion. Revenue from gaming machines stood at PHP2.89 billion, up 35.2 percent from the prior-year quarter.
Non-gaming revenue at the casino resort increased by 55.6 percent year-on-year in the third quarter, to PHP672 million, said the parent company.
Universal Entertainment said in its latest operating results that the “highest priority” at Okada Manila is “to continue adding attractions and amenities”.
The group stated: “With the opening of the Coral Wing (Tower B), the number of operational rooms is also steadily increasing. These activities are positioning the integrated resort business for continued growth, in part by enabling the resort to host large group events and foreign tour groups.”
Universal Entertainment said it expected adjusted segment EBITDA in the casino resort business “to benefit from increasing profit margins throughout the year as sales increase faster than expenses”.
It added: “Increasing number of hotel rooms, retail outlets and other amenities is expected to attract more guests and boost mass-market casino revenues.”
In a separate filing on Tuesday, Universal Entertainment said Okada Manila’s aggregate October GGR rose 29.3 percent year-on-year, to PHP3.46 billion, compared to nearly PHP2.68 billion a year earlier.
VIP table games GGR went up 49.4 percent in the month, to just above PHP1.86 billion, while rolling chip volume grew by 110.5 percent year-on-year, to PHP73.75 billion. Mass-market table games GGR rose 16.9 percent, to PHP842 million, while gaming machine GGR expanded by 6.3 percent, to PHP754 million.
The property recorded adjusted segment EBITDA of PHP636 million for October, up 71.4 percent from PHP371 million in October 2018.
Union Gaming analyst John DeCree said the brokerage was raising its fourth-quarter and 2020 estimates for Universal Entertainment’s adjusted segment EBITDA.
“Our increase is driven primarily by the margin improvement in the amusement [pachinko] business and near-term VIP and mass market trends based on the latest monthly results,” said Mr DeCree. “We still expect mass volumes to pick up nicely at the property in second quarter 2020 – when the full 500 new rooms are up and running at the hotel.”
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”After deep reflection we decided at this time that our focus should be on other potential locations in Japan [beyond Osaka], including among others, Yokohama”
Francis Lui Yiu Tung
Vce-chairman of Macau casino operator Galaxy Entertainment Group