Supplier News
Philippines – Philippine operators predict rebound in 2016
By Phil - 30 November 2015
Mirroring the spectacular nosedive by Macau’s casino sector, decline in the Philippine gaming market has seen share prices for local operators slashed by half.
First Metro Investment Corp. (FMIC) believes that tightly aligned to the Macau sector, the Philippine slump is set to continue.
In a report, FMIC said: “Listed Philippine casino and hotel operators have seen their share prices decline by more than 50 percent year-to-date despite consolidated gross gaming revenues in the country increasing by a fifth in 2015.”
Macau’s 17-months of GGR decline, a result of China’s anti-corruption crackdown, will be hit further by new laws forcing junkets to disclose records and staff background checks as well as a smoking ban which will be imposed on VIP gaming rooms.
“The second round of restrictions weaken the business outlook in Macau and could keep the so-called “Macau-led contagion” overhang on Asian gaming capitals, including Manila, where investors sentiment toward gaming stocks has soured,” FMIC added. “However, the business volume disappointed as the strict crackdown by the Chinese government deterred VIP players from gambling here with some of them going to Singapore, instead, another Asian upscale VIP destination. In addition, the territorial dispute over the South China Sea has discouraged some VIP players to visit the Philippines. Lower revenues, higher operating expenses.”
Philippine operators remain optimistic though with Solaire believing its GGR will climb during 2016 as long as it is paid money owed by VIP players by the end of 2015.
Melco Crown, owner of City of Dreams Philippines also expects to post a profit next year. Chairman Lawrence Ho said: ““We believe that City of Dreams Manila is well positioned for long term success as Manila transforms into an exciting and diverse tourism destination for the region.”
Bloomberry Resorts, who recently reported a net loss of PHP189.5m(US$4.1m) for the third quarter of 2015, compared to a net profit of PHP991.7m for the same period in 2014, described its earnings as “a significant quarter-on-quarter improvement” from the previous quarter due to ‘improving operations in the Philippines.’
Enrique Razon, Chairman and Chief Executive of Bloomberry Resorts, said; “Our investments in the Sky Tower are beginning to show returns. Given the improvement in Philippine operations and the opening of a new revenue stream, we are hopeful that returns will continue to gain higher ground.”
“Both gaming and retail operations will be in full blast next year so a revenue boost is anticipated,” FMIC said. “We expect decreasing market share for Resorts World Manila in Paranaque as gamblers transfer to the Entertainment City complex. These integrated resorts have started to alter strategy by growing the revenues of the mass segment. However, this shift will generate lower but stable revenues in the long-term.”
A recovery in Macau is seen as being key to success in the Philippine casino market. Things will however be getting worse before they improve in Macau.
Macau’s Chief Executive Fernando Chui believes that GGR will only reach 200bn patacas ($25bn) in 2016, marking the lowest annual return since 2010.
Mr. Chui said: “We try to be conservative and maintain stability. We will try our best to develop the economy.”
That forecast is seen as being ‘a conservative expectation’ by Tim Craighead, a gaming analyst with Bloomberg Intelligence.
“We expect the mass-market to stabilise and recover, and we believe the VIP business has structural challenges that aren’t going away any time soon,” he said.
