Scientific Game

Bloomberry land grab would hurt balance sheet but boost market value: Morgan Stanley

Tuesday, 14 November 2017 05:39
Share
Visit us

A successful bid for the land on which its Solaire Resort & Casino sits would be a negative for owner and operator Bloomberry Resorts Corporation’s balance sheet, cash flow, net income and valuation – but it could drive the company’s market value to a premium.

So say analysts at financial services firm Morgan Stanley in a report weighing the pros and cons of such a move after Philippine gaming regulator Pagcor announced it will auction off two parcels of land covering 160,359 square meters on the Solaire site for a minimum of Php37 billion later this month.

The land is currently being leased to Sureste Properties – a subsidiary of Bloomberry Resorts – who under the terms of the auction will be given last rights to match any bid to purchase the parcels.

In a Monday note, Morgan Stanley’s Alex Poon and Praveen Choudhary observe that the Php37 million asking price represents around 30% of Bloomberry’s market value and would therefore come with a number of risks. They include increasing net debt from Php8.3 billion to Php45.3 billion, reducing ROIC from 24% to 15%, reducing the amount of expected dividend in 2018 and raising interest expenses by around Php900 million.

However, the saving of lease payments of Php250 million per annum until at least 2033 “is not material in our view,” Morgan Stanley adds.

“If Bloomberry continues to lease the land from [another] new owner, the annual lease payment may increase by 9x to Php2.2 billion based on 6% gross rental yield on Php37 billion from the Php250 million that Bloomberry is paying currently.

“This will take down our 2018e EBITDA estimates by 13%. The current rent is Php250 million per annum for the first 10 years and inflates by 4% per annum after until July 2033.”

Purchase of the land could also see a valuation premium.

“The purchase may put Bloomberry’s valuation comparable to peers who own their land like Okada (private) and RWM (11x EV/EBITDA) – also given that we expect Bloomberry to begin regular dividends in 2018, and Quezon City and Solaire Phase 2 to drive long-term growth,” analysts suggest. “Macau and Singapore casinos do not own the land. Bloomberry FCFE of 9% (2018e) remains attractive, stay OW.”

What's new

G2E Asia Awards: Meet the Judges – Alidad Tash

G2E Asia Awards: Meet the Judges – Alidad Tash Alidad Tash has been in the gaming industry since 2000, starting on the Las Vegas strip at the Venetian and continuing on to Macau 12 years ago. He was on the opening team at Venetian Macao, the first Cotai property, leading the analytics department. While there, he popularized the now-ubiquitous No... Monday, 23 April 2018 07:13

PhilWeb sees 1Q18 revenue surge 236%

PhilWeb sees 1Q18 revenue surge 236% Philippines gaming services provider PhilWeb Corporation has announced a 236.7% surge in revenue to Php87.8 million for the three months to 31 March 2018. The year-on-year boost follows the renewal of its license by PAGCOR last August after Gregorio Araneta III purchased a 53.75% stake in the compa... Monday, 23 April 2018 07:09

Galaxy’s Philippines partner still buying up Boracay land: report

Galaxy’s Philippines partner still buying up Boracay land: report Galaxy Entertainment Group’s Philippines partner, Leisure and Resorts World Corp (LRWC), is still buying land in Boracay despite recent claims by President Rodrigo Duterte that no new casinos would be built on the holiday island. According to a report by The Philippine Star, Municipal Executive A... Monday, 23 April 2018 07:01

Judiciary Police arrest one, clear junkets over cryptocurrency subscription scheme

Judiciary Police arrest one, clear junkets over cryptocurrency subscription scheme Macau’s Judiciary Police have detained a local man for his involvement in a cryptocurrency subscription allegedly being falsely promoted by Lantai Digital Application Technology. In a media briefing on Friday, a Judiciary Police spokesman confirmed that the man – a 37-year-old named only as Hon... Monday, 23 April 2018 06:25

Current Issue

G2E ASIA AWARDS to debut in 2018

G2E ASIA AWARDS to debut in 2018 Inside Asian Gaming and G2E Asia will co-organize the inaugural G2E Asia Awards in 2018 – the official awards of Asia’s biggest industry  trade show and exhibition, G2E Asia. In an exciting development for the Asian gaming industry, Inside Asian Gaming and G2E Asia announced in March that they... Wednesday, 04 April 2018 14:07

Indian Dreaming: Tiger Palace putting Nepal in the game

Indian Dreaming: Tiger Palace putting Nepal in the game By Ben Blaschke The first integrated resort to be built in South Asia, Tiger Palace Resort in Nepal’s lowland Terai plains sits just eight kilometers from the border with India’s most populous state Uttar Pradesh, home to some 215 million people. At US$52 million it also represents a fascinatin... Wednesday, 04 April 2018 14:12

Digital Danger

Digital Danger As the world becomes increasingly digital, the world’s casino operators are taking cyber security more seriously than ever before. But as leading risk mitigation company Kroll explains, risks remain – and not always where you might expect.  By Ben Blaschke AS cautionary tales go, the downfall... Wednesday, 04 April 2018 14:09

Gaming development outlook along the Belt and Road

Gaming development outlook along the Belt and Road Michael Zhu, SVP of International Planning and Analysis for The Innovation Group, delves into the benefits that Chinese President Xi Jinping’s “One Belt and One Road” initiative will bring to Asia’s gaming industry. By Michael Zhu PRIOR to the current recovery of Macau’s gaming malaise, ... Wednesday, 04 April 2018 14:08