Philippines office leasing giant Megaworld is adamant that a Chinese crackdown on the country’s Philippine Offshore Gaming Operators (POGOs) won’t hurt its bottom line, even if the market thinks otherwise.
According to Bloomberg, Megaworld shares have fallen 22% so far in August, wiping off almost Php43 billion (US$822 million) in market value due to concerns over the impact the crackdown might have on residential sales and office rentals.
“While we are the biggest lessor of office spaces in the Philippines, the (online casino) issue won’t affect both our office and residential businesses because our exposure remains small and manageable,” the company’s Chief Strategy Officer, Andrew Tan, told Bloomberg.
Philippines gaming regulator PAGCOR announced last week that it had placed a moratorium on accepting new POGO license applications while it addresses a variety of concerns over the scheme. It is believed those concerns relate to an earlier statement released by the Chinese Embassy in the Philippines regarding the proposed transfer of Chinese workers employed by POGOs to self-contained hubs and warning against the illegal inducement of Chinese citizens to gamble either online or in Philippines land-based casinos.
There are an estimated 135,000 Chinese workers currently employed in the Philippines by 58 license POGOs.
As reported by IAG, POGOs were recently credited with driving a 27% increase in office rentals in Metro Manila in the three months to 31 March 2019 with Megaworld one of the major beneficiaries.
Online casino operators now account for 12% of the Megaworld’s total rental gross leasable area and will contribute 8% of total leasing income and EBITDA in 2020, up from 7% of leasable area and 5% of rental income in 2018. However, Tan said such growth was incidental to the company’s broader interests.
“We are quite comfortable with this exposure and we don’t see ourselves increasing the percentage contribution of POGO to our business in the next two years,” he said.