No Chinese high rollers? No problem!
RESORTS World Manila contributed photo
Many independent analysts agree: The Philippines is the next big thing in the gaming scene, especially with the Entertainment City project of Philippine Amusement and Gaming Corp. (Pagcor) starting to spread its wings.
According to stock brokerage firm Regina Capital, “Philippines-based casinos have all the chances of becoming the most attractive gambling hub in Asia.”
In a recent research note, the Philippine Stock Exchange-member firm said the country seemed to have dodged the worst effects of the crisis that had affected the Asian gambling sector and Macau, in particular. This assessment was anchored on latest evidence, both empirical and anecdotal.
In fact, it almost seems that the opposite is happening.
“The Philippines is believed to greatly benefit from the anti-corruption campaign of Chinese President Xi Jinping and the reports released by the most prominent companies just come to prove that statement,” Regina Capital said.
It is a view shared by the leadership of Pagcor, which recently had to fend off worried questions about the viability of its sprawling gaming development on the edge of Manila Bay, given the ongoing crackdown versus Chinese high-rolling gamblers.
In fact, Pagcor believes that the local casino industry will post “significant growth” this year in terms of revenues amid the Chinese government’s anti-corruption crackdown that has seen gaming revenues across the region drop sharply.
According to Pagcor chair and CEO Cristino Naguiat Jr., new Philippine casino resorts will avoid the worst effects of the decline in the number of mainland Chinese clients because, from the outset, their business models do not rely too much on the promise of revenues from this big-spending group.
He is talking about the four licensees which have put up or are putting up casino resort complexes at Entertainment City. There are already two in operation —Solaire Casino and Resort of Enrique Razon’s Bloomberry Resources and City of Dreams which is operated by gaming tycoons Lawrence Ho of Macau and James Packer of Australia.
Another two are expected to be completed soon—Tiger Resort of Japanese pachinko magnate Kazuo Okada and a bigger Resorts World Manila complex to be built by the Genting Group of Malaysia.
The goal is to overtake Singapore in terms of gaming revenue in a few years. But this projection was made before the Chinese government’s crackdown—something local officials are downplaying.
“China is not our number one market,” Naguiat said.
He explained that the Philippine gaming industry relied on both foreign and local players. These Chinese, he said, make up a small part of that revenue mix.
“More Chinese gamers here would be better for us, but of 100 million outbound Chinese tourists, we get less than 1 percent of that. It’s relatively small,” he said, adding that there is a wider mix of nationalities visiting the country to play in local casinos. “It’s not just the Chinese.”
So far, the numbers look good.
According to Regina Capital, the company that is in charge of Resorts World Manila, Travellers International Hotel Group, announced that its net profit doubled year-on-year to reach P5.45 billion or $121.6 million.
Bloomberry Resorts, for its part, reported an increase in the net profit. It was estimated at P4.07 billion. In comparison, when their property, Solaire Resort & Casino, opened doors, a net loss of P1.32 billion was reported.
The gaming revenue of Travellers marked a slight decline but market analysts attributed it to the increased competition as well as to the fact that casino executives focused on attracting mass players and the VIP tournaments were somehow abandoned, the stock brokerage said.
“As for the gross gaming revenue reported by Bloomberry, company officials announced that it jumped to reach P30.39 billion,” it added. “Bloomberry recently announced that it was about to enter the South Korean gambling market, which is another indication that the Philippines-based companies are not influenced by the anti-corruption campaign and they even make plans for further expansion.”
“These numbers made the market analysts forecast that, by and large, the gambling industry in the Philippines is going to expand,” Regina Capital said.
“What is more, the position of the City of Dreams in the local market is quite interesting.”
The stock brokerage lays out two possible scenarios for the growing competition among the gaming operators in Entertainment City—both positive: “Either City of Dreams will share the revenues with the other casinos, or its opening will take the Philippines gambling sector to new heights and the sector will undergo further expansion.”
These developments augur well for Pagcor, and the industry in general.
For this year, Naguiat said another double-digit growth was “very possible” for the industry’s gross gaming revenues, aided by the opening of the $1-billion City of Dreams complex.
In 2014, the local casino industry experienced a 16-percent increase in gross gaming revenues compared to the previous year, the Pagcor chief said, adding that the consolidated revenues of the Philippine gaming scene now stands at $2.5 billion.
“But more important than that is the fact that our VIP and junket players have increased by almost 50 percent,” Naguiat said, referring to big-spending foreign players who fly in just to experience the new local casinos.
The Pagcor chief pointed out that gaming revenues for Macau and Singapore have declined in 2014 by double-digit rates, while that of the Philippines has increased by double digits.
“At $2.5 billion for 2014, we’re still lower than Singapore. But ours is increasing while the rest are declining,” Naguiat said. We’re coming from a low base figure.”
Regina Capital agrees with Pagcor’s assessment and remains bullish on the sector despite the influx of new casinos, and the adverse developments in the Chinese market.
“The reason why Philippines casinos have not been befallen by the crisis is the fact that they rely predominantly on mass players, while Macau casino venues used to generate their revenues from high-roller players,” the stock brokerage said.
“In point of fact, the gambling crisis affected some Singapore-based casinos as well but, as already mentioned, the Philippines managed to resist and apparently, local gambling officials have taken wholeheartedly the idea for making the country as popular gambling hub as Las Vegas and Macau,” it added.
This could only augur well for the local gaming scene into the medium term.
