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Philippines – Maybank Securities pitches Travellers International as likely bidder for Pagcor casinos

By - 26 April 2023

Maybank Securities believes that Philippine casino group Travellers International, developer of Resorts World Manila, is one of the most likely bidders for PAGCOR’s 43 casinos.

Maybank Securities analyst Miguel Sevidal believes the price will have to be revisited though with Php80bn (US$1.44bn) simply too high.

He said: “Travellers may be a candidate, given its medium to long-term plans of setting up small casino-hotels in tourism estates, which management communicated during the recent 4Q22 earnings call. Travellers will see a near-term boost, however, from Resorts World Westside (400 tables, 1,200 slot machines), which we expect to open by 1H25.

“Existing operators in Clark may be interested to bid to expand their regional footprint,” he added. “On top of the 10 casino sites in Metro Manila, eight of the PAGCOR properties are situated in the Central Luzon region, within vicinity of Clark. The Central Luzon region notably benefits from above-average disposable income growth and infrastructure development.”

“PAGCOR said it aims to sell its assets for Php80bn, implying a trailing EV/EBITDA multiple of 14x to 24x based on the industry EBITDA margins of 21 per cent to 37 per cent,” he added. “This valuation represents a premium to Bloomberry FY22A EV/EBITDA of 12.2x. Considering the slower post-Covid recovery of PAGCOR casinos, below-industry GGR growth observed for PAGCOR casinos, likely high costs for rehabilitation and integration with existing properties for prospective buyers, and previous transactions for integrated resorts outside the Philippines fetching valuations of 13x to 16x EV/EBITDA, imply that PAGCOR’s proposed valuation is steep.

“We do not expect a transaction to occur at these valuations, which are in line with Macau casinos. Philippine casinos have historically traded at a 25 per cent discount to Macau operators.”

The first quarter of the year saw PAGCOR casinos generate a 49.43 per cent increase in income from gaming operations to Php16.9bn (US$303m).

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