Philippine gaming up faster than Vegas, Macau: analyst
Casino gaming is “growing faster in the Philippine market” than in “Las Vegas, Macau, and Singapore,” said a Tuesday note from Morgan Stanley Asia Ltd.
Analyst Praveen Choudhary made the observation in the context of a memo looking at Philippine casino firm Bloomberry Resorts Corp’s first-quarter results.
The banking group said it expected Bloomberry Resorts – which runs the Solaire Resort and Casino in the Philippine capital Manila – to show a 16 percent growth in earnings before interest, taxation, depreciation and amortisation (EBITDA) for 2019, which would “exceed that of regional peers”. Morgan Stanley expects Macau’s six operators to record between them EBITDA expansion of “only” 4 percent.
The Philippine casino market as a whole had an uptick in business in the first three months of this year. The Philippine Amusement and Gaming Corp (Pagcor) – an operator-cum-regulator of casino gaming in that country – had in early May reported total income net of taxes of nearly PHP9.69 billion (US$185.1 million) in the first quarter, a 14.7-percent increase from a year earlier.
In Clark County, Nevada, an area including the Las Vegas Strip and its major casino resorts, taxable gross gaming revenue (GGR) – a different measure of industry performance – for the first quarter rose 3.8 percent year-on-year to nearly US$2.71 billion.
The Macau market recorded a slight decline of 0.5 percent year-on-year in first-quarter GGR – to a tally of MOP76.15 billion (US$9.4 billion), as revealed in data issued on April 1. The Macau decline was led by a 13.4 percent fall in VIP GGR.
Proxy, live streaming
Morgan Stanley noted that “video streaming” – understood to be a reference to so-called gaming studios separate from the licensed casino market, that offer live table games broadcast over the Internet to offshore customers – as being a factor in Philippine gaming industry growth.
“We expect overseas expansion by Macau junkets (with favorable margins) and video streaming to continue to drive solid growth in the Philippines in 2019,” wrote Mr Choudhary.
A number of investment analysts has perviously referred to the presence of a different form of remote gambling – so-called proxy betting – in the licensed casino market in the Philippines. In that scenario, a customer not physically present on the gaming floor makes a bet, usually via telephone, to a “proxy” who is physically present at the table, and makes the wager on their behalf. The Macau regulator has issued a memo to its industry explaining that such proxy betting is not permitted in Macau.
Bloomberry Resorts’ Solaire was the first of the large-scale private-sector casinos to open in Entertainment City in the Philippine capital. In its first-quarter results filed on May 8, Bloomberry Resorts said its VIP GGR for the period declined 15.9 percent percent year-on-year, faster than the rate of decline in the overall Macau market.
But mass-table play GGR at Solaire rose by 23.5 percent in the reporting period, to nearly PHP4.00 billion, from PHP3.24 billion in the prior-year quarter.
“We expect Bloomberry to report mass revenue and EBITDA growth of 15 percent and 16 percent, respectively, in 2019,” wrote Morgan Stanley’s Mr Choudhary.
Profit at Philippine casino operator Bloomberry Resorts actually fell 40.0 percent year-on-year in the first quarter to March 31 on higher revenue.
Japanese brokerage Nomura said in a Tuesday note that – while investors had reacted negatively on the news at the time – the decline in net profit was “largely due to base effects in first-quarter 2018”.
Nomura analysts Thomas Huang and Diane Go said that was “primarily interest expense tied to the land acquisition that only began in second-quarter 2018”.
That was a reference to Bloomberry Resorts having opted to purchase from Pagcor – for circa US$700 million – the land on which Solaire stands. The deal was completed in June last year.
(Updated 8.25am, May 15)
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