Any sell-off of state-owned casinos in the Philippines is unlikely to spark a competitive threat to the private-sector casino resorts in Manila’s Entertainment City and beyond, as the Casino Filipino gaming floors commonly have older equipment and will require significant capital investment, says a Tuesday note from Maybank Securities Inc.
Alejandro Tengco, chairman and chief executive of the country’s casino regulator, the Philippine Amusement and Gaming Corp (Pagcor), had in late March said the body was looking to raise circa PHP80 billion (US$1.44 billion at current exchange rates) from the sale of its public-sector casinos, citing a wish to split regulatory from operating functions.
Not only was the Philippine authorities’ total estimated valuation for the 43 Casino Filipino sites “steep”, as suggested by some other analysts, but prospective buyers were likely to face “high costs for rehabilitation and integration” of supporting technology, such as “progressive jackpots, information technology and software,” wrote Maybank analyst Miguel Sevidal.
“We believe buying interest will generally be low, unless valuations become significantly more attractive,” added Mr Sevidal.
The analyst did “not see” Bloomberry Resorts Corp, operator of Solaire Resort and Casino in Entertainment City, as a “key bidder”, as the institution expects the casino firm to “focus its expansion efforts on Solaire North and, eventually, its Paniman property”.
Travellers International Hotel Group Inc, which runs casino and leisure complex Newport World Resorts, “may be a candidate, given its plans to set up small casino-hotels in tourism estates”.
“Clark casinos may also bid to expand their regional footprint,” he added.
Commenting on the current ambience of the country’s public-sector casinos, Mr Sevidal noted: “During our recent visit to Casino Filipino branches, we noticed that the mass tables and slot machines were older and less furbished vis-à-vis comparable equipment in Entertainment City.”
The analyst stated that “only 10 of the 43” Casino Filipino venues were “notably within proximity to Entertainment City”.
He suggested that currently Casino Filipino outlets “cater primarily to the local mass market and will likely see limited upside from the recovery of foreign tourism” in the Philippines. “Close to 100 percent of the players in the Casino Filipino outlets we recently visited were locals,” said the analyst.
Maybank said that in its view, any sale of Pagcor operations could actually “add 10 percent to Entertainment City’s gross gaming revenue, and increase the local mass market exposure” of existing private-sector operators.
The Entertainment City properties produced about 78.7 percent of all industry GGR in the fourth quarter of last year, i.e., just under PHP44.06 billion. The latter figure was up 15.2 percent quarter-on-quarter, according to data issued by Pagcor in March.
Entertainment City encompasses Solaire Resort and Casino; Okada Manila; City of Dreams Manila; and Newport World Resorts.
Last week at the annual meeting of Bloomberry Resorts, the chairman Enrique Razon was quoted as saying that for the remainder of this year he expected domestic mass-market gamblers to be the mainstay of his current casino business.
He cited a government forecast of 6 percent to 7 percent growth this year in Philippine gross domestic product as a supporting factor.
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