IAG October 2015 - page 4

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Chief ExecutiveOfficer
AndrewW. Scott
Founder andAdviser
EditorAt Large
PaulDoocey, JohnGrochowski, JamesHodl,
MattPollins, I.NelsonRose
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Latte Iao
Ike, GaryWong, JamesLeong,
WongKei Cheong
TarredWith theSameBrush
ntil recently, Asia’s aspiring casino destinations had declared their determination to
follow inMacau’s footsteps.Now, they’reatpains topointout they’reonadifferentpath.
“The whole industry has been painted with the same brush, but we’re nowhere
near the situation in Macau, where revenue is really falling,” remarked Philippine
billionaireEnriqueRazon Jr, owner of BloomberryResortCorp.,whichoperates theSolaireResort and
Casino at the burgeoningManilaBay integrated resort cluster.
In an interview with
, Mr Razon said the Philippine casinomarket can grow without
China through increased spendingbymass and local gamblers.
“The good thingnow, inhindsight, is that our relationshipwithChina is really not that good,” he
said. “Sowenever had the business fromChina, whichnowadays is probably a good thing.”
Tensions between China and the Philippines sporadically flare up over the disputed Spratly
Islands in the SouthChina Sea, where China has begun building airbases, dredging sand and dirt to
create 2,000 acres of landwhere littlemore than rocky reefs existed before. Its biggest project is on
Mischief Island, which sits less than 150miles off the Philippines’ Palawan Island but is 600miles
from China’s ownHainan Island. China has been ratcheting up tensions in the Spratlys, partly as a
result of which thenumber of Chinese tourists to thePhilippines fell by about 33% in thefirst quarter.
Unlike Macau, where gaming revenue fell 36% year on year in the first nine months of 2015,
revenue was actually up 16% in the Philippines in the first six months of the year, and state-run
regulator Pagcor (Philippine Amusement and Gaming Corp.) expects growth could pick up in the
second half. It seems investors were hoping formuch headier growth, however, fueled by a flood of
high-rollers fromChina, whichhas failed tomaterialize amid an anti-corruptiondrive spearheadedby
President Xi Jinping andworsening relations between the twonations.
Even though revenue at Solaire grew 9.5% in the second quarter to 5.99 billion pesos, higher
operating costs and expenses led to Bloomberry posting a net loss of 773.5 million pesos. The
company’sstockpricehas fallenabout 60% this year,making it thecountry’sworst-performingmajor
stock. Mr Razon added, though, that the company will continue pursuing premium players through
junket operators insteadof doing it directly.
“Theenvironmentwill remaindifficultand investorswill remainskepticalas it’shard to imaginewhere
spectacular growthwill come from for Philippine casinoswithout China, since that’s the region’s biggest
sourceof gaming traffic,”saidAstrodelCastillo,managingdirector at FirstGradeFinance Inc.
Bloomberry’splanned investments inSouthKorea’sforeigners-onlycasinomarket,which isdominated
by Chinese players, could also be impacted by continued weak demand from China. The company will
probablyknowbyDecemberwhether itsbid tobuildacasino resort at the IncheonFreeEconomicZone is
successful,whileaventure in Jeju Islandmaystartmakingmoneynext year,MrRazonsaid.
“This is the time tomake goodmoves that willmake you a lot ofmoney down the road.We have
to adapt to themarket, whatever that takes,” saidMr Razon. But themost important way to adapt to
evolvingmarket conditionscouldbe to look further beyondChina. Bloomberry seems tobedoing just
that, and is now reported to be seeking a gaming permit inArgentina, where it wouldneed to spend
about $500million tobuild a “respectable” casino,Mr Razon said.
Meanwhile, Macau’s beleaguered operators were given some cause for optimism following a
2nd October report in Chinese-language newspaper
Macau Daily
that Li Gang, the director of the
Chinese government’s liaisonoffice inMacau, had indicated that theCentral government recognizes
gaming as theprimary industry of theMacau economy and is studyingpossiblemeasures tohelp lift
it out of its currentmalaise. They’d have towait, however, for further news on just what shape those
supportingpolicieswould take.
“Potential policy support from the central governmentmay surprise on the upside, but the details
willbecritical tounderstandaspreviousgovernmentstatementshavenotalways resulted inanypositive
impact ongaming revenuesor visitation,”notedanalysts frombrokerageSanfordC. Bernstein&Co.
The current outlook, based on a median estimate of 12 analysts surveyed by
, is for
Macau’s gaming revenue to drop 32% this year. Analysts at Nomura came out with a prediction that
revenuewouldslidea further8% in2016,marking the thirdconsecutiveyearofdeclines. “Our2016fiscal
GGR forecast suggestsVIP revenues returning to2008/09global financial crisis levels,” they added.
Nomuradid say, though, that it expected to see sequential improvement inmass-market gaming
revenues formostMacauoperatorswhenofficial third-quarter figureswere released inmid-October.
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