INSIDE ASIAN GAMING | August 2013 4 Inside Asian Gaming is published by Must Read Publications Ltd 5A FIT Center Avenida Comercial de Macau Macau Tel: (853) 8294 6755 For subscription enquiries, please email
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[email protected] EDITORIAL Looking Good in the Philippines I f you’re betting with billionaire Enrique Razon on Manila as a regional gambling destination there’s a lot to like in the early returns out of Solaire Resort & Casino. Parent Bloomberry Resorts (PSE: BLOOM), which is 71% owned by the ports tycoon, hadn’t reported for the second quarter as of this writing. But the company released some basics together with an upbeat statement fromMr Razon in a recent filing with the Philippine Stock Exchange. This was done in part to tamp down speculation after PAGCOR Chairman Cristino Naguiat let it out two and a half months after Solaire’s March opening that gaming revenue had reached PHP1.3 billion (US$29.7 million). Bloomberry refused to confirm or deny the number. But it wasn’t long after it appeared on a Philippine news site on 1st of June that investment analysts began to warm to the Solaire story and BLOOM began to climb back from a 52-week low of eight pesos and change. Maybe Mr Naguiat was being coy because Solaire wound up grossing PHP4.2 billion in the April-June period, 3.9 billion of it in the casino, the equivalent of $89.3 million, and Bloomberry turned its first profit as an operating company, a modest but creditable PHP22.7 million. They have a ways to go to catchmarket leader ResortsWorldManila, where total revenues hit PHP10.2 billion in the first three months of the year, the most recent results available. But Resorts World has 300 more slot machines, 650 more hotel rooms, a 1,500-seat showroom and the lure of an adjoining shopping mall developed by co-owner Megaworld, one of the giants of Philippine real estate. It also has a three-year head start in the marketplace. And its airport location, though only a few kilometers from the specially zoned Entertainment City complex Solaire occupies along Manila Bay, arguably is more locals-friendly given the unholy mess that is traffic in the capital city. What’s notably similar is that gaming drove right around 92% of total revenues at both properties in their respective quarters, although Solaire spent about twice as much on promotional allowances as a percentage of total revenues. But this is typical for a new property trying to build awareness and a data base against established competition: VIP costs a lot more even with the favorable tax treatment the Philippines accords it; and it’s not unreasonable to assume that high rollers contributed a larger relative share of the win at Solaire given the imbalance in their respective mass offerings and Solaire’s desire to position itself as a luxury alternative. The Bloomberry filing support this, stating that “several junket operators, bringing in foreign VIP players” were signed during the quarter. At the same time, EBITDA margins improved dramatically—18.6% in May, 32.7% in June—which says a lot about management’s ability to answer the challenges of ramping up a business model that really has no precedent in the country. Come next summer critical mass enters the picture with the opening next door of Belle Corp.’s $1.3 billion Belle Grande Manila Bay, operated by Melco Crown Entertainment. At that point, Solaire expects to have its next phase completed with 300 more rooms and suites, 5,600 square meters of retail, a showroom, convention and meeting space and a luxury spa. Travellers International Hotel Group, the Megaworld-Genting Hong Kong joint venture behind ResortsWorld, also is licensed to build at Entertainment City and plans to open its $1.2 billion Resorts World Bayshore in 2016. By then, annual tourist arrivals to the Philippines will have approached 7 million, and over at the airport ResortsWorld Manila plans to be ready with two new hotels (Sheraton and Hilton), 1,000 additional rooms in all, and a bigger casino. Significantly, the property reported at the start of the year that its China business had recovered to half the levels of two years ago before a dispute between the two governments over territorial waters escalated to a point in 2012 where travel began to suffer. This showed in the gaming numbers. The casino did $2.4 million a day on average in the first quarter. The total for the three months was up more than 53% year on year. The $234 million the property generated across all its businesses represented an increase of 51%, matching the rate of growth in that banner year of 2011. Travellers was forecasting 20%. This of course is significant for Solaire and for Entertainment City. Comparisons may be premature, it’s true, but they’re not without interest for what they suggest about the Philippines as an upside play.