Agbriefings March 2017

MALAYSIA

Strategic plan gains momentum pg.24

VIETNAM

Foreign interest gains on locals prospect pg.18

LAOS

IN FOCUS

Philippines pg.26

Will growing competition crimp growth?

Savan Legend eyes expansion pg.20

SAIPAN

Typhoons and topsoil blamed for delays pg.36

ASEAN Gaming Summit spotlights regional opportunities pg. 40

MESSAGE 3

All eyes on The Philippines

I

t’s not just because the Asian gaming industry is

neighboring Cambodia’s border operators.

convening in the Philippines for the ASEAN Gaming

In Australasia, we bring you the woes of Crown’s

Summit this month that we have chosen the country

re-focused efforts on expanding its Australian business.

as our focus for this edition of Asia Gaming Briefings.

SkyCity experienced a hit on international and VIP

With Macau struggling to find its new norm; Vietnam

business but saw growth in its domestic operations.

and Cambodia still emerging; and Japan a far off pipe

This time around our traditional Supplier Special

dream for a select few; all eyes in the industry are set

is dedicated to the inaugural edition of the ASEAN

on the growth story in the Philippines.

Gaming Summit.

With the expansion of existing casino resorts, the

This event has been long in the making for AGB

launch this year of the region’s largest IR to date, and

and the timing could have not been better. Our aim has

the structural changes to the regulatory framework of

always remained the same: to develop relevant, engaging

the jurisdiction, the Philippines has come of age as a

content for the Asian gaming industry. Case in point,

gaming market and arguably contains the most potential

the convergence, over a three-day-conference, of the

in the region for growth at this stage.

region’s leading operators, regulators and suppliers to

In this edition, we measure the level of market growth and assess the competition from local and regional operators, at time when compliance has become the key word in both the land-based and online spheres.

explore and debate the potential and opportunities the emerging jurisdictions in SE Asia present.

We would like to take this opportunity to thank

In the North Asia Jurisdiction Updates we look at

Gaming Summit. The event features more than 60 speakers covering developments in gaming in both the

new gaming zones, while the debut of the first true IR

terrestrial and online space, with around 200 delegates

in Incheon, Korea, revives concerns about the potential

in attendance. From new-style integrated resorts,

for growth in the foreigner-only market.

addressing the premium mass market, to sports betting

been making major efforts to provide more nongaming amenities, though so far have been unable to provide the wow factor. Similarly, In Singapore, in the absence of catalysts for further growth on the gaming

Luis Pereira

our sponsors and patrons who supported the ASEAN

the flurry of activity in Russia’s existing and potential

Back in Macau we examine how operators have

Rosalind Wade

innovations and online gaming, this event is for anyone with an interest in this dynamic region.

Don’t miss it: if you haven’t yet, visit aseangaming. com to register as a delegate.

See you there!

side, Marina Bay Sands and Genting Singapore are expected to seek to boost their non-gaming activities and monetize assets.

@agbrief

In IndoChina, Laos remains volatile and somewhat

Asia Gaming Brief

Asia Gaming Brief

hostile to foreign investment but Vietnam’s newly introduced gambling legislation has reportedly prompted

On behalf of Asia Gaming Brief

international casino developers to take another look,

Rosalind Wade & Luis Pereira

though on the other hand it has raised concerns among

PUBLISHERS

www.agbrief.com MARCH 2017 EDITION SERIES II • ISSUE XVIII

PUBLISHED BY BLUE SKY VENTURE LTD. 16/F China Law Building, 409 Av. da Praia Grande Macau SAR | P.O. Box 1139 t. +853 2871 7267 f. +853 2871 7264 e. enquiries@agbrief.com ADVERTISING ENQUIRIES advertising@agbrief.com SUBSCRIPTION ENQUIRIES memberships@agbrief.com EDITORIAL ENQUIRIES editorial@agbrief.com

PUBLISHERS & MDS Rosalind Wade, Luis Pereira MANAGING EDITOR Sharon Singleton ASIA EDITOR Felix Ng DESIGN Michael Meszaros PHOTOGRAPHY Agencies

DISCLAMER All rights reserved. No part of this publication may be reproduced or transmitted in any shape or form, or by any means, or stored in any retrieval system of any nature, without prior express permission. The publishers accept no responsibility for loss or damage to any materials submitted for publication. The views expressed within are not necessarily subscribed by the publishers.

For more info, please visit our website www.agbrief.com.

AGBRIEF PARTNER EVENTS

› ICE Totally Gaming › iGaming Asia Congress › G2E Asia › Russian Gaming Week › iGaming Super Show › World Gaming Executive Summit › Australasian Gaming Expo › Gaming, Racing & Wagering Australia › G2E Las Vegas › European iGaming Congress › IAGR Annual Conference › Macao Gaming Show › Malta iGaming Seminar › SiGMA

Asia Gaming Briefings | March 2017

CONTENTS 4

NORTH ASIA

GREATER CHINA MACAU

06

SOUTH EAST ASIA

INDOCHINA

RUSSIA

10

VIETNAM

SOUTH KOREA

14

LAOS

JAPAN

16

22

AUSTRALIA

34

MALAYSIA

24

SAIPAN

36

PHILIPPINES

26

NEW ZEALAND

38

Asia Gaming Briefings | March 2017

20

AUSTRALASIA

SINGAPORE

SPECIAL FOCUS

18

30

SUPPLIER SPECIAL REPORT

40

LAST WORD

54

GREATER CHINA

6

MACAU

Few thrills in non-gaming Macau’s operators have been making major efforts to provide more non-gaming amenities, though so far have been unable to provide the wow factor.

GREATER CHINA 7

C

hinese Premier Li Keqiang praised Macau’s efforts to diversify its economy during a three-day visit last year, but market experts say operators are still trying to get the recipe right when it comes to non-gaming attractions and face an uphill struggle.

Macau, spurred by Beijing, has been seeking to boost its non-gaming sector since gaming revenues spiralled downwards in 2014 on the back of a crackdown on corruption.

While gambling is still given as the major reason for Chinese visitation to Macau today, a recent survey released by Bernstein Research noted that certain non-gaming offerings were increasingly being cited as a factor for Chinese visitation.

“Most visitors view gaming as an extension of the holiday experience, but not necessarily the only reason for visiting Macau. Shopping and dining are important aspects, with time spent on both surpassing hours spent gaming,” said the brokerage.

According to Bernstein, visitors spent an average of 2.6 hours on shopping (in casino hotels), 4.4 hours on activities outside resorts (which includes shopping), and 2.5 hours other non-gaming activities in casino hotels, compared to 4.7 hours on the gaming floor.

Operators have been making efforts to bolster their food & beverage and retail offerings in order to satisfy the market. “The quality, value and diversity of food & beverage is certainly a customer preference driver in deciding where to visit, play and stay in Macau,” said Kevin Clayton, chief marketing officer of Galaxy Entertainment Group.

“

I have been following the market for 13 years now and there hasn’t been anything that is non-gaming in orientation that people will specifically come to see or witness.

”

“In response to increasing demand Galaxy Entertainment Group has increased its dining options in Galaxy Macau and Broadway to over 120 destinations, as we continue to bring to market the greatest diversity and choice matched with quality and service, with several new outlets opened 2016 and others to follow 2017. The Macau visitor [is] becoming more discerning and therefore more demanding at

all price points,” he added. But good food and new dresses won’t keep the Chinese occupied for long. In 2015, over 120 million Chinese citizens travelled overseas. Out of this number, only 13 percent made their way to Macau, with many more flocking to neighboringHong Kong, Japan, Korea and Singapore for their shopping, food, and entertainment needs.

“There is no doubt that non-gaming is attracting the Chinese globally, but it does not play a significant role in Macau’s case,” said Glenn McCartney, an associate professor of gaming and hospitality management at the University of Macau.

“There’s a major shift, because going back 10 years ago, we were the preferred destination because we were familiar, people could speak their language…” said McCartney. “But the Chinese outbound tourist is more savvy now.”

Operators are also finding it difficult to come up with a non-gaming product that appeals to the Chinese customer’s tastes and discerning wallet.

Tryst Nightclub years ago tried to emulate its success in Las Vegas, but failed when it couldn’t attract enough party goers through its doors. Las Vegas’ famed Cirque du Soleil in 2012 closed its Zaia show only three-anda-half years into its 10-year contract, and similarly, the Taboo Cabaret show saw its early demise at City of Dreams Macau last year, only two-and-a-half years following its 2013 debut. Another example is legendary broadway musical, CATS which opened in 2015 at Venetian Macau, but failed to build enough interest for a second run.

Recent openings in Macau have put a focus on providing non-gaming amenities.

Visitors are treated to Las Vegas-style magic shows and blockbuster rides at Melco Crown’s Hollywood-themed Studio City, whereas Wynn Resorts’ Wynn Palace is displaying famed Chinese artworks. But, alone, the new amenities will not be enough for visitors to decide on making the journey. “I have been following the market for 13 years now and there hasn’t been anything that is non-gaming in orientation that people will specifically come to see or witness,” commented Sudhir Kale, CEO of Game Plan Consultants, previously a consultant to Sands China.

Sam Sheng at Macau Double Squared Consulting says the problem lies in the market segment to which non-gaming offerings are targeted. The majority of the retail offerings are still at the luxury end of the market, despite efforts to bring in more High Street brands. “Macau non-gaming amenities have been focusing on the upscale segments,” he

GROSS GAMING REVENUE Y16 MOP 223b

-3.3%

Y16 December MOP19.8b

+8%

Y17 January MOP19.3b

+3.1%

GGRE Y17E Bloomberg Morgan Stanley Bernstein Buckingham

(Source: DICJ)

+7% +10% +8% +6%

Deutsche Bank

+10.3%

Wells Fargo

+10%

Legend gets 15 tables The newest casino hotel in Fisherman’s Wharf was granted 15 new mass market gaming tables from the Macau government. Developed by Macau Legend Development Ltd., The Legend Palace Hotel, is located at the end of the Fisherman’s Wharf complex on the Macau Peninsula, complete with 223 rooms and a casino.

Smoking lounges to stay About 55 percent of gaming employees in Macau are in favor of smoking lounges, according to a survey commissioned by the city’s gaming concessionaires. The survey conducted by the University of Macau, questioned near 14,301 gaming employees on the controversial indoor smoking solution. The government had been mulling a complete ban of indoor smoking, but now concedes the lounges are here to stay, albeit with some tweaks to the rules.

Asia Gaming Briefings | March 2017

GREATER CHINA 8

said. “However, such amenities only attract small percentage of Macau’s 30 million plus annual visitors.”

McCartney says the problem stems from Macau’s (lack of) destination brand image.

When you look at Vegas, the first thing that comes to mind isn’t necessarily the casino industry, it’s a place to come to party and have fun, he says. But “Macau as a whole has not made up its mind in terms of what it wants to be known for and where it wants to carve its niche,” added Kale. To combat the problem, McCartney and Kale say a change is needed in how operators approach non-gaming.

“Non-gaming was never given any particular emphasis because gaming revenues are [too] substantial,” said McCartney. “Non gaming in many aspects is looked upon as a support pillar and a driver for gaming revenue and particularly for premium mass and VIP junket,” he explains.

“Companies are largely providing nongaming amenities in an effort to appease the government,” said Kale. “...no one in their right mind believes in the foreseeable future, that we are going to have a balance between non-gaming and gaming similar to that of Vegas.”

SANDS CHINA (1928:HK) Sands China has five properties in Macau.

The new $3 billion The Parisian opened in September and received a highly positive reaction from analysts. It features a scale replica of the Eiffel Tower, nearly 13,000 hotel rooms, two million square feet of retail-mall offerings and two million square feet of MICE capacity. The company recently announced its retail line up for another 170 shops. Sands was still only awarded 100 tables at the open, like the VIP-focused Wynn Palace.

Despite the opening enthusiasm, Q4 results disappointed, with high pre-opening expenses, greater-than-expected cannibalization and a slower-than-expected ramp up of the Parisian holding back revenue.

Net income rose 5.6 percent year-on-year to $607 million. Revenue was $3.1 billion, a rise of 7.4 percent year-on-year. Adjusted property EBITDA was $610 million in the quarter, slightly below analyst expectations.

“The miss was mainly due to lower turnover rent (miss by US$25 million) on slower retail sales and higher base rent, weaker slot business (US$4 million) and lower mass table luck (company estimated US$15 million),” said Morgan Stanley analysts.“We

Asia Gaming Briefings | March 2017

expect Parisian to sequentially improve in each quarter in 2017. However, we think the true operating potential of Parisian is a 2018 story,” said Union Gaming.

Bernstein noted VIP GGR growth was lower than the market quarter on quarter, “even with above normal hold.”

The company in January confirmed that chief financial officer stephen law Cheuk-kin had resigned after only four months in the role.

GALAXY ENTERTAINMENT GROUP (27.HK) Galaxy has three main properties and runs three City Club casinos inside hotels.

The company’s Galaxy Macau Phase 2 and Broadway at Galaxy Macau opened on May 27, 2015, almost doubling the capacity of the resort.

The operator said it continues to move forward with Cotai Phase 3, with the potential to start construction in late Q1, or early Q2. It also said it is moving ahead with plans for a low-density IR on the neighbouring island of Hengqin.

The company recently took on former SLS Las Vegas president and chief operating officer Scott Kreeger to manage the development of the Phase 4 expansion. According to the Las Vegas Review-Journal, Kreeger used his knowledge of Las Vegas gaming trends to strengthen business at SLS. He was also responsible for ending the resort’s partnership with retailer Fred Segal and for closing the hotel’s buffet and Ku Noodle restaurant.

The company’s Q4 results beat estimates, with revenue of HK$14.4 billion and adjusted EBITDA rising 20 percent year on year to $3 billion. According to Bernstein analysis, GGR was up 12 percent quarter on quarter, beating the average quarterly market growth of 10 percent. VIP GGR was up 18 percent quarter on quarter and Mass GGR was up 4 percent quarter on quarter.

MGM CHINA (2282:HK) MGM China is operating a single casino on the peninsula. The opening for its new $2.9 billion development, the MGM Cotai, has been pushed back from late 2016 to the second half of 2017.

The resort will not feature any VIP rooms at the opening and will focus on mass gaming, while its original property will continue to offer VIP services.

MGM Cotai will have approximately 1,500 hotel rooms and suites, meeting spaces, high end spa, retail offerings and food and

beverage outlets. The HK$24 billion ($3.1 billion) project has a jewellry-box design and 85 percent of its gross floor area will be dedicated to non-gaming facilities. Analysts who have recently visited the site say they expect the opening to be no later than the October Golden Week holiday. MGM China Holdings reported an improvement in 16Q4 profit and said revenue edged up, helped mainly by a higher VIP hold.

The company said revenue was $500 million, an increase of $1 million over the prior year period. Main floor table games revenue was down 2 percent. VIP table games revenue increased 7 percent due to an increase in hold percentage to 3.7 percent in the current year quarter, compared to 3.0 percent in the prior year quarter, partially offset by a decrease in turnover of 16 percent compared to the prior year quarter.

Adjusted EBITDA increased 5 percent to $138 million, compared to $131 million in the prior year quarter. “In addition to construction disruption and lower hold rate in the mass segment, we suspect the weaker performance is also due to Wynn Macau Limited moving some tables back to Wynn Macau in peninsula and new casino resorts creating more competitive pressure for MGM China,” Morningstar analyst Chelsey Tam said.

GREATER CHINA 9

MELCO CROWN ENTERTAINMENT (6883.HK) Melco Crown has three casinos and the Mocha Clubs. Melco International Development recently acquired an extra US$1.1 billion worth of shares in the company taking its stake to 51.3 percent stake, compared to 37.9 percent before. This follows the decision of partner Crown Resorts to sell down its holding.

Despite a slow ramp up, the company’s newest resort, the Hollywood-themed Studio City, is now making a strong contribution to results. The property opened with only mass tables, but has added a small VIP operation since November.

For Q4, Melco posted a 13 percent increase in revenue as an improved performance at Studio City and City of Dreams Manila offset declines at its older properties. Revenue came in at $1.2 billion, up from $1.05 billion a year earlier, in line with consensus estimates.

Adjusted property EBITDA was $304.3 million as compared to $236.4 million in the fourth quarter of 2015, representing an increase of 29 percent.

“As expected, revenue and EBITDA performance for the quarter was entirely

driven by Studio City and COD Manila. Overall performance could have been even better at Studio City, if not for a remarkably low VIP hold rate,” Buckingham Research analyst Christopher Jones wrote in a recent note.

WYNN MACAU (1128:HK) Wynn Resorts reported a better-thanexpected 30.5 percent year-on-year rise in net income for the fourth quarter of 2016, attributed to strong revenue from Wynn Palace, and offset by decreased earnings from Wynn Macau. Net revenues for the fourth quarter of 2016 were $1.3 billion, representing an increase of 37.3 percent year-on-year.

Morgan Stanley upped its 2017 EBITDA forecast by 2 percent and its price target by 3 percent after a strong 16Q4 beat. It now sees property EBITDA of $1.04 billion in 2017, up 33 percent year-on-year. “We expect continued ramp-up of Palace through 2017, as mass table yield and margins are still at a discount to industry averages,” the firm said.

Traffic to the property is expected to improve due to better connectivity with other resorts and as much of the construction work still surrounding the property is completed.

SJM HOLDINGS (880:HK) SJM Holdings has 20 casinos on the Macau Peninsula. The company is currently building The Grand Lisboa Palace on Cotai, which is scheduled for opening in 18H1. The casino’s original plans were for 700 gaming tables and over 1,200 slot machines across a gaming floor area of approximately 27,000 square metres. Analysts at Bernstein say the company is facing near-term headwinds as it is coming late to Cotai and has significant exposure to low quality peninsula-based satellite properties.

In Q4 adjusted EBITDA increased 36 percent to HK$973 million, while GGR fell 6 percent to HKD10 billion. VIP dropped 1 percent and mass tables fell 11 percent from a year earlier.

“The company continues to be unable to grow mass and continues to lose market share,” Bernstein wrote in a note.

The company has said the Grand Lisboa has expanded its premium mass marketing efforts and will be opening the Premium Mass focused Dragon Club in March.

“Until we see the results of the company’s Premium Mass efforts we remain skeptical of material improvement in Mass,” the note said.

Asia Gaming Briefings | March 2017

NORTH ASIA

10

RUSSIA

New casinos open amid talk of new zones Russia’s southern and western gaming zones have seen a flurry of activity over the past few months, while reports have emerged of new areas being considered for casino investment.

NORTH ASIA 11

SUMMIT ASCENT ROLLING CHIP VOLUME JULY Y16 HK $2.0 b AUGUST Y16 HK $2.2b

Summit Ascent teams up with Kangwon Land Summit Ascent Holdings’ G1 Entertainment says it is currently preparing for its second gaming facility, which will be in partnership with South Korean casino operator Kangwon Land, according to a report on the local government website. “There are plans to build a facility of 100,000 square meters, including 400 to 500 hotel rooms...

A t the moment, the project is being prepared for defence [presentation], and the size of investments will amount to 500 million dollars,” G1 executive director Craig Ballantyne was cited as saying.

R

ussia’s southern and western gaming zones have seen a flurry of activity over the past few months, while reports have emerged of new areas being considered for casino investment.

Moscow designated four zones for casino gambling in 2009 in remote locations on the fringes of the country and outlawed gambling anywhere else.

Since then, the zones have been expanded to six to include the Crimea and Sochi, the home of the 2014 Winter Olympics. While one of the original zones -- Azov City -- is

expected to be closed down.

According to reports more zones may be on the cards, raising question marks over the shifting sands of Russian regulation for foreign investors. Initially, when adopting the law in 2007 the authorities pledged to not introduce changes to the locations of the zones for the next 10 years.

Russian gambling expert Nikolai Oganezov, who previously chaired one of Russia’s selfregulating organizations - the Bookmaker’s Self-Regulatory Organisation - and is currently constructing a hotel complex in Rostov-na-

Donu, said the original law setting out the zones was flawed.

“The gaming business itself cannot be a growth driver for a certain territory. It only works in conjunction with the tourist one.

The reality showed futility of the law, which we saw a couple of years ago, when the gaming zone was set up in Sochi.”

“If one carefully studies the story [of Azovcity’s planned closure] from the legal point of view, it becomes clear that each of the zones, either already functioning or the ones being projected are at risk. And any investment in

Asia Gaming Briefings | March 2017

NORTH ASIA 12

Yantarnaya zone casino debuts Sobranie - the newest casino in the Yantarnaya gambling zone, held its grand opening in February. Touted as “the biggest casino in Europe”, the casino occupies a total area of 18,000 square metres on the Baltic Sea coast and, as of now, includes 350 slot machines and 14 gaming tables. There are plans to increase their number to 1,000 and 40 respectively.

Total investment in the project totals RUB 2.5 billion (US$43.1 million) and is expected to reach up to RUB 3.5 billion.

them may be considered a high risk, because the legislator did not ensure the consistency of the legal framework,” he says.

According to reports, a port in Russia’s southern republic of Dagestan, which is considered a strategically important facility, is to be turned into a gaming zone with two casinos backed by a powerful Russian senator.

The port itself has been in debt for quite a while and is up for privatization in 2017-2019.

The construction company supposedly tied to the senator denied media reports about the plans.

For a territory to get gaming zone status, it needs the supreme executive authority of the region where the zone is to be established to submit an application to the Finance Ministry, which tables the proposal to the government, which can then introduce amendments to the law.

Stavropol Territory governor Vladimir Vladimirov has also asked Russian senators to support the idea of setting up a gaming zone in the Caucasus Mineralniye Vody (Rus: Mineral Waters).

He even set the date for its opening in October 2017, saying that it would have a positive impact on replenishing the budget, projecting annual profits at RUB 1.5 billion.

Oganezov says a gaming zone in Dagestan is “unlikely” despite the powers of the senator in question because of its predominantly Muslim population. But he believes that Stavropol may

Asia Gaming Briefings | March 2017

be more successful.

“Hypothetically, this territory may become a gaming zone as it is in a dire need for a tourist leap at the federal level, and the state has invested big money in social and transport infrastructure, as for instance before the 2018 World Cup, and this infrastructure cannot be regarded as self-sufficient and badly needs consequent maintaining and financing.”

“If these two aspects coincide, then the creation of a gaming zone in the Caucasus Mineralnye Vody region is quite likely,” he said.

However, Russian Prime Minister Dmitry Medvedev has recently spoken against the creation of a gambling zone in the Russian resort town of Kislovodsk. Meanwhile, a document on the development plans for the town of Kislovodsk, in the mountainous area in southern Russia, 600 kilometres away from Sochi, through to 2030, which was signed by Prime Minister Dmitry Medvedev in January 2017, says that it may be included in the list of territories for gaming zones.

“

The gaming business itself cannot be a growth driver for a certain territory.

It only works in conjunction with the tourist one. The reality showed futility of the law, which we saw a couple of years ago, when the gaming zone was set up in Sochi.

”

Russia has also seen a flurry of new openings in its existing zones. Two large casinos were officially launched in two gambling zones near the Black Sea resort of Sochi and the Baltic Sea port of Kaliningrad.

The Sobranie casino in the Yantarnaya (Rus: Amber) gambling zone, dubbed “one of the biggest casinos in Europe,” by Russian media, opened its doors at the beginning of February.

Its main room occupies an area of 3,600 square metres and, as of now, involves 350 slot machines and 14 gaming tables, with plans to increase the number threefold.

The current amount of investment in the project totals RUB 2.5 billion and is expected to top RUB 3.5 billion, according to Valery Saparin, marketing director of the Uni Management

company in charge of the casino.

It became the second gaming facility in the zone, where the slot machine hall Magic Crystal was launched in April 2016. Its profits are not known, but the local authorities said in October that they expect state coffers to receive just RUB 9 million in taxes, instead of the planned 40 million, from the zone in 2016.

The Sobranie casino was opened by the previously unknown Uni Management company, which, as it appeared, is owned by a former director of the Royal Time Group company. The latter in turn owns the Oracul casino in Russia’s oldest operating gaming zone, Azov-City, and has interest in the Primorye and Altai-based zones.

Despite generating RUB 236.5 million in taxes in 2016 and receiving large-scale investments, Azov-city is supposed to be closed by 1 January 2019, according to a government decree.

That’s because according to the law two zones cannot exist in the same region and Sochi, whose facilities were financed by state banks during the Olympics, has taken precedence.

The Krasnaya Polyana (Eng: Red Meadow) gambling zone in Sochi saw the grand opening of its first casino on 5 January 2017.

It has 569 slot machines and 70 gaming tables and is expected to bring RUB 433.57 million in taxes in 2017. According to Russian media, investments in the project amounted to RUB 4 billion.Progress is also being made in the construction sites of Primorye in the Far East. The zone, with its close proximity to northern China, is seen as the most viable of Russia’s gaming areas.

Hong Kong-listed Naga Corp has started the construction of its first gaming facility, Mayak, local media reported on 1 December.

According to regional official Andrei Folomeyev, at that time the company was carrying out “preparatory excavation works for setting a construction site.”

The facility, whose construction is expected to cost about $70 million will include a 279-room hotel and a casino with 300 slot machines and 30 gaming tables. It is expected to be operational by the end of 2018.

Summit Ascent Holdings’ G1 Entertainment is currently preparing the design project of its second gaming facility, which it is developing in partnership with South Korean casino operator Kangwon Land.

There were also reports about an upcoming opening in Crimea in 2017, but no specific date has been set and no investor named. No new developments have been recorded in the Altai-based Siberian Coin gaming zone.

ALDERNEY - YOUR ACCESS TO WORLD MARKETS

13

Access new markets.

Reach your potential.

Where do you want to grow?

Globally recognised, Alderney provides a refreshingly flexible, risk-based approach to licensing, supporting licensees to access worldwide markets.

We can help you reach your potential.

alderneygambling.com Asia Gaming Briefings | March 2017

NORTH ASIA 14

SOUTH KOREA

First IR seeks to inspire lukewarm market South Korea’s first true integrated resort is to open in April, although concerns remain about the potential for growth in the foreigner-only market.

P

aradise Group and Japan’s Sega Sammy are scheduled to open their KRW1.3 trillion property in Incheon April 20, becoming the country’s first fully fledged integrated resort and the largest casino to date.

The opening will come as other planned projects struggle to make headway and amidst doubts over the growth potential of the market given its reliance on overseas visitors.

Paradise City will be located about 1.1 km from Incheon International airport, a zone which is ultimately scheduled to host at least two other major IR projects. Just 40 minutes from downtown Seoul, it is within a four-hour flight of Hong Kong and Taiwan

Asia Gaming Briefings | March 2017

and just 90 minutes from Beijing, Shanghai and Tokyo. There is a population of about 1.35 billion people in the surrounding region.

Paradise owns 55 percent of the venture, with Sega Sammy holding 45 percent.

The casino will have a total area of 13,553 m2, with 160 table games: 288 electronic table and 350 slots, according to a company filing.

The accompanying hotel will contain about 711 premium rooms, with the associated facilities such as swimming pools, a spa and Italian, Chinese and Japanese restaurants.

According to a recent note from Shinhan Investment, the opening of Paradise City is likely to boost Paradise Co’s revenue by about 35.3 percent.

“Paradise Co as a whole is forecast to post sales of KRW938.6 billion ($805.3 million) in 2017,” analyst June-won Sung said in a note.

The figure includes KRW751.0 billion in casino sales, up 24.8 percent in year-onyear terms.

“The share price is projected to climb further if monthly earnings of the new casino resort come in line with the consensus after the opening. Costs may become an issue… if sales fall short of expectations.”

Sung said he expected Paradise Co to record “total operating profit of KRW54.3 billion (-24.3 percent year-on-year) and net profit of KRW23.1 billion (-64.6 percent year-on-year) in 2017.”

NORTH ASIA 15

FOREIGNER-ONLY REVENUE Y15

$1.13b

Y16E

$1.15b

Y17E

$1.21b

Y18E

$1.33b (Source: Morgan Stanley)

LOTTERY SALES Y12 KRW 38.1b Y13 KRW 32.3b Y14 KRW 32.8b (Source: Korea Lottery Commission)

“

The share price is projected to climb further if monthly earnings of the new casino resort come in line with the consensus after the opening. Costs may become an issue… if sales fall short of expectations.

”

However, the opening of the new IR may come at the expense of other casinos operating in the country. According to Daiwa Securities, Grand Korea Leisure expects increased competition to hold back GGR this year.

The company is forecasting 2017 casino sales to be KRW530 billion (US$460.1 million), slightly lower than in 2016.

South Korea’s two foreigner-only casinos have seen improved results in 2016, coming off a weak comparison with 2015 when an outbreak of Middle Eastern Respiratory Syndrome triggered a slump in visitor arrivals.

The casinos have also been struggling with a crackdown on marketing in mainland

China, making it more difficult to reach the key Chinese VIP players. As a result analysts remain wary about immediate growth prospects.

Paradise reported 2016 total sales up 12.9 percent with casino sales up 14.2 percent, however in Q4, which was not affected by the MERS-hit year-ago comparison, sales were down 2.6 percent with casino sales down 3.7 percent.

Operating profit slumped 41.9 percent to KRW6.4 billion, mainly due to losses from the IR project.

Its overall drop in the quarter was dominated by Chinese VIPs, which made up just under half of the total of KRW1.3 trillion. The Japanese contributed KRW308 billion, while the mass market was the smallest segment at KRW182 billion.

Grand Korea Leisure Co reported an 85 percent year-on-year increase in net income for the fourth quarter of 2016, to KRW34.15 billion. Revenue rose 20.5 percent year-onyear to KRW148.62 billion.

However, bucking the trend was Kangwon Land, the country’s only casino where locals are permitted to gamble. Profit for Q4 fell 31.4 percent, to KRW63.75 billion, compared to KRW92.97 billion in the prior-year period.

Lottery good bet amidst weak economy A Finance Ministry survey of 1,000 people last year found that 55.9 percent said they have made a lottery ticket purchase within the last 12 months, slightly down from the previous year’s 56.5 percent, news reports said. About 52.1 percent were in the highest income bracket of a monthly 4 million won or higher, followed by those in the 3-3.99 million won income group with 24.1 percent and in the 2-2.99 million basket with 13.1 percent.

Lottery sales low

by OECD average Lottery sales accounted for 0.22 percent of gross domestic product in 2015, ranking South Korea as 22nd among 30 Organization for Economic Cooperation and Development states, local media reported, citing Korea Lottery Commission data. The OECD average is 0.47 percent.

Asia Gaming Briefings | March 2017

NORTH ASIA 16

JAPAN

Casino debate goes local After a bitter final debate at the national level, the government finally passed a bill legalizing casinos. Now the discussion of the switches to the local level as regional administrations debate the pros and cons of hosting integrated resorts in their municipalities.

T

he passage of Japan’s Casino Bill into law in the early morning hours of December 15, 2016, was achieved only after a bruising political struggle.

The administration of Shinzo Abe had waited too long into the Extraordinary Diet Session to begin the deliberations on the bill and thus was forced to steamroll over the opposition parties in a clumsy, ad hoc fashion.

Even the ruling coalition Komeito Party was embarrassed by the process, unable to unify internal opinion among its lawmakers.

Meanwhile, all of Japan’s major newspapers editorialized against the Casino Bill and polls showed that the general public was opposed to it by a roughly 2-to-1 margin. The legislation was enacted, but the political groundwork had been poorly laid.

In the weeks since the enactment, all major parties were ready to back away and to lick their respective wounds. The issue largely disappeared from the headlines. Concerns over diplomatic relations with South Korea and the formation of the Donald Trump administration soon directed public attention elsewhere.

Asia Gaming Briefings | March 2017

Nevertheless, three pending matters continue to absorb concern.

First, all parties agree that legislation for combating gambling addiction needs to be passed in the current Ordinary Diet Session, scheduled to end this June. There is scope for cooperation and perhaps even consensus on the terms of this legislation, which is also expected to address issues related to pachinko and horse racing in addition to future casinos within integrated resorts.

Detailed laws Second, the passage of the Casino Law in December still requires the passage of a detailed set of laws providing for the specifics of how the basic authorization will be implemented and enforced. This must include such matters as the maximum number of casinos to be licensed, the establishment of organizations for regulation, and much more. The Abe administration is believed to have already drawn up most of these plans, but they must still be submitted to the Diet for passage within a year. This is likely to be controversial, and may pit the

government against the opposition parties at the national level once again. Third comes the most difficult aspects, which are likely drag on for a decade or more—the questions of where Japan’s integrated resorts will be located and which organizations will become operators.

On the one hand, interest from international investors and operators is undeniably keen. There are predictions that Japanese casino revenues could rise in excess of US$20 billion annually, far beyond what the Las Vegas Strip takes in. Las Vegas Sands, MGM Resorts, Wynn Resorts, and even Hard Rock Cafe International—rumors are circulating that almost every major player in the industry has its eye on participating in integrated resorts in Japan.

Many local government leaders also have their eyes on potential revenues, none more enthusiastically than those of Osaka, who are very eager to open the first Japanese integrated resort at Yumeshima, an artificial island in Osaka Bay. The Governor of Osaka Prefecture, Ichiro Matsui, is also the co-leader of the national Nippon Ishin political party that teamed up with Prime Minister Abe to pass the Casino Law, so it stands to reason that Yumeshima

NORTH ASIA 17

MARKET POTENTIAL PACHINKO NET WIN Y15 $35b LOTTERY REVENUE Y15 $5b (Source: Morgan Stanley) GGRE $6.4b

Fitch based on two IRs

Hard Rock taps Sands exec for Japan division

will indeed have the political clout to be at or near the head of the line when it comes to determining locations for integrated resorts.

But a key aspect of the story is that the majority of the Japanese public remains opposed to the establishment of casinos due to their concerns that they will spread gambling addiction, organized crime, and contribute to youth delinquency.

“

A policy to deal with gambling addiction problems is extremely important. This is what the city needs to first discuss. Hosting an IR facility is just one way to promote local economic growth.

”

For this reason, many local Japanese political leaders, asked about it by local reporters, have rejected hosting casinos near their communities.

Typical of these responses, for example, was that of Sakae Saito, the mayor of Atami city, Shizuoka Prefecture, who stated on December 26, “Atami is blessed with hot springs, natural beauty, scenery, and fine food culture. I want to refine and enhance these treasures, and for that we have no need to rely on casinos.”

Moreover, those local political leaders who do wish to build integrated resorts in their

regions are almost certain to face protests from some residents, and perhaps even lawsuits and electoral challenges. This scenario is already emerging in the city of Yokohama, whose mayor, Fumiko Hayashi, had expressed interest in hosting a casino within her municipality, but who faces reelection in August and now seems to be more cautious.

Hayashi, who faces a tough re-election campaign against a candidate opposed to casinos, said recently that it would be very difficult to formulate detailed IR plans.

“A policy to deal with gambling addiction problems is extremely important. This is what the city needs to first discuss. Hosting an IR facility is just one way to promote local economic growth,” she said.

On January 11, Kazuyoshi Nagashima, a former House of Representatives lawmaker, announced that he would become an independent candidate to challenge Mayor Hayashi, and that opposition to hosting a casino in Yokohama would become his leading campaign issue: “I want to hear from the people whether they say ‘Yes’ or ‘No’ to having a casino here,” he declared.

With Japanese public fears about the social ills of gambling remaining strong, the proponents of integrated resorts may find that even with the Abe administration willing to spend some of its political capital to ram the enabling legislation through the Diet at the national level, they will still be facing fierce opposition in almost every local area within Japan where the establishment of an casino is contemplated.

Hard Rock International has hired former Sands China CEO Edward Tracy to head a new division focused on integrated resort opportunities in Japan. “With the recent passing of Japan’s Integrated Resorts Promotion Bill, the company fully intends to apply this expertise and recognition as a major contender among the bidders for resort licenses,” the company said.

Japan plans bill to help curb gambling addiction The Japanese government is considering a bill to introduce a basic law on gambling addiction prevention, that would also cover pachinko and horse racing. The law would require gambling operators, including municipal governments to put together basic plans for toughening gambling regulations.

Asia Gaming Briefings | March 2017

18

INDOCHINA

18

VIETNAM

Foreign interest stirs on locals prospect International casino operators are reportedly taking another look at Vietnam in the wake of newly introduced gambling legislation, while existing operator Donaco International is reporting a much improved performance.

T

he government published its long-awaited bill setting out regulations for casinos earlier this year, with the rules set to take effect in March.

The bill includes a three-year pilot scheme allowing locals to gamble at two yet to be completed resorts, one in the far north and one in the south on Phu Quoc island.

It is unclear at present as to whether the scheme may also extend to the Grand Ho Tram resort.

According to local media reports, international investors are already eyeing the market’s potential, with VietnamNetBridge reporting that Las Vegas Sands, Banyan Tree, Crown Resorts, Chow Tai Fook and Sun City all closely following developments

in the country. The decree sets a minimum investment of of $2 billion. Vietnam is keen to attract more foreign investment into its tourism sector, with the introduction of integrated resorts seen as a major draw.

According to the Institute for Sustainable Development under the Vietnam Academy of Social Sciences, if foreign investment in the casino industry increases by $3 billion, the GDP will increase by 0.58 percent.

Tourism has been growing strongly.

Total international arrivals last year rose 26 percent to 10,012,735. China was by far the biggest source market with 2.7 million visitors in 2016, up 51 percent on the prior year, followed by South Korea, with 1.5 million.

Tourism authorities are eyeing a 15 percent

INDOCHINA

form is able to provide an adequate return on an investment of that level.

The country currently has 8 casinos, with the largest being the Grand Ho Tram on the southern coast, owned by Asian Coast Development. The wording of the final regulations, unlike in earlier drafts, did not specifically name Van Don and Phu Quoc as the only resorts to be allowed to admit locals, leaving some to speculate that the door may still be open for the Grand Ho Tram to take part.

“The soothsayers will say Ho Tram is ready to accept local Vietnamese as early as March 15, the date the decree takes effect,” Augustine Ha Ton Vinh, president and CEO of Stellar Management, said.

“The pessimistic people and those who are knowledgeable about the government, however, believe It ain’t over till the fat lady sings.”

“

The pessimistic people and those who are knowledgeable about the government, however, believe it ain’t over till the fat lady sings.

”

increase in international tourists this year, with the sector expected to contribute 10 percent to gross domestic product. According to government projections, the country is expected to receive 20 million visitors by 2020, contributing $35 billion in tourism revenue.However, analysts warn against over optimism.

The resorts currently included in the pilot scheme are relatively remote, although infrastructure is being improved to ease access.

There is also no guarantee that the scheme will be extended after the initial period to include other resorts.

Concern has also been voiced about the size of the initial capital required, with some doubting the market in its current

Meanwhile. Australia-listed Donaco International has reported a much improved performance at its Aristo International property in its latest half-year results, helped by a focus on driving mass market visitation and reducing reliance on VIP visitors from China.

Total visitors in the first half to end December surged to more than 100,000, up from 62,000 in the same period last year.

It said the strong trend has continued into the first two months of this year.

Although excluded from the locals pilot project, in its results announcement, the company said “as a pioneer of casino gaming in Vietnam, Donaco is currently exploring its options to participate in and benefit from the liberalization of the industry.”

Donaco reported total revenue rose 15 percent to RMB69.4 million.

Net gaming revenue rose 12 percent to RMB43.1 million, while non-gaming revenue jumped 20 percent to RMB26.3 million. VIP turnover declined 23 percent.

FOREIGNER-ONLY GGR Aristo H1 revenue RMB69.4m

+15.0%

Net gaming revenue RMB43.1m

+11.9%

Non-gaming revenue RMB26.3m

+20.6%

TOURISM ARRIVALS JAN Y17 1,007,238

+23.6%

Y16 10,012,735

+26.0%

China Arrivals 2.6m

+51.4%

Locals set to bet on football, racing Vietnam will allow betting on international football matches, as well as horse and greyhound racing from the end of March. Online betting is not allowed, and bookmakers are required to be located at least 500 meters away from schools and venues with children.

Bookmaking operators will also need to meet strict capital requirements depending on what sport is offered.

According to the decree, bookmakers will require VND1 trillion for horse racing and football, and VND 300 billion for greyhound.

Daily gambling limits seen as too low The imposition of a VND1 million ($45) daily gambling limit is too low and will still cause people to go to overseas casinos to gamble, critics say. “VND 25 million a month won’t be able to satisfy them. They would rather go gambling abroad than go to domestic casinos,” the owner of a private company in Hanoi was cited as saying in local media.

Asia Gaming Briefings | March 2017

19

INDOCHINA 20

LAOS

Macau Legend eyes Laos expansion Macau Legend has big plans for Laos after its $42 million purchase of Savan Vegas, but the Laos market remains volatile and somewhat hostile to foreign investment.

L

aos hit the headlines last year when the government put Savan Vegas out for bids having seized the resort from its foreign owners, Sanum Investments, over alleged tax liabilities.

The sale generated interest from six buyers, including Macau junket promoter Iao Kun Group and casino operator Macau Legend.

The bid process was turbulent at times; Sanum Investments announced it was suing the Lao government and San Marco Capital Partners, whom the government had hired to facilitate the sale, to slow down the process.

They were unsuccessful, and in May last year the government announced Macau Legend had been selected as the winning bidder, paying $42 million to purchase the property and the rights to operate it for 50 years.

Asia Gaming Briefings | March 2017

Following completion of the sale in September, Macau Legend claims Savan Legend has “contributed positive EBITDA in the first few months of operation” and that in the long-term it has plans to expand the resort with a new hotel, two golf courses and additional leisure and entertainment facilities.

Before looking at Macau Legend’s plans for Laos, it is worth taking a closer look at the country’s gambling market and what opportunities it presents.

There is a regulatory framework in place, but one some suggest needs modernization.

Shaun McCamley, head of Asia operations at Global Market Advisors, says for the market to grow and prosper, existing gambling laws need to be overhauled.

“The current regulations are out of date, grey and need to be completely reworked, particularly the gaming tax structures.

Currently it is a flat gaming tax negotiated between the government and each operator.

There are no independent audit capabilities, and the numbers casinos submit cannot be independently verified.”

Savan Legend, which is in Savannakhet Province in the south of the country and bordering Thailand, is one of just three legal casinos in Laos. The market is still quite large, and made up predominantly of Thais who cross the border specifically to play, and a few Chinese.

The market is mostly recreational, with McCamley estimating an 80/20 split between mass and VIP players, with tourist backpackers

INDOCHINA 21

TOURISM PROJECTIONS: MINISTRY OF INFORMATION, CULTURE AND TOURISM Arrivals Revenue in USD Y16E 4.68M

728.45M

+9.20%

784.70M

+9.70%

840.95M

+10.2%

897.21M

+10.8%

953.46M

+11.5%

1.2909b

+15.0%

Y17E 5.03M Y18E 5.37M Y19E 5.72M Y20E 6.07M Y17E 8.16M

Match fixing scandal hits Lao football tending to steer clear of the country’s casinos.

The Laos economy has been steadily growing over recent years, driven in part by an increase in tourists entering the country.

Between 2010 and 2014, the number of visitors rose from 2 million to 4.1 million, growing 16 percent each year on average.

The Laos government is seeking to capitalize on this, and has plans to further develop parts of the country to boost visitation numbers. One of the areas identified is the Savannakhet Province.

This is strengthened by China’s One Belt, One Road policy, which is driving investment into Laos and other countries in the region.

Macau Legend says this will further strengthen the Laos economy, growing its gambling industry in the process.

“The investments from China have contributed and will continue to contribute to the economic development in Laos.

Savan Legend is in an area the government has earmarked as part of its development strategy,” a spokesman said.

Since being handed the keys to Savan Legend back in September, Macau Legend

has been busy refurbishing and re-branding the property. The resort currently has 90 gaming tables, 466 slot machines and 472 hotel rooms. “We are currently undertaking an extensive renovation program of the rebranded Savan Resorts, which includes new hotel suites, upgraded entertainment as well as new food and beverage experiences,” the spokesman added.

By upgrading the resort, the operator hopes to draw in more customers from neighbouring countries. Savannakhet Province is located around six hours away from the Wattay International Airport, and attracts more than one million visitors a year from Thailand, Vietnam, China, Cambodia, Malaysia and Singapore.

“Over the long-term, we are committed to the future expansion of Savan Resorts,” a spokesman said.This includes plans to develop a second IR project on a parcel of land in the Savan Seno Special Economic Zone. The IR will be built adjacent to Savan Legend, and will include two golf courses, a 600-room hotel, villas, casino, exhibition hall, pool and spa facilities.

The Asian Football Confederation banned 22 players and officials from Cambodia and Laos for life for match fixing. The individuals were involved in the manipulation of matches involving the representative teams of Laos and the club side Lao Toyota FC, the AFC said. Fifteen were current or former Laos or Lao Toyota FC players.

Lao economy tipped for strong 2017 growth Laos is forecast to have reached a growth rate of 6.8 percent in 2016, while for 2017 the economy is expected to improve slightly to a rate of 7 percent, according to consultancy firm Dezan Shira & Associates. This make Laos the third fastest growing economy in ASEAN, behind Myanmar and Cambodia. Inflation remains steady at a projected 1.6 percent and 2.3 percent in 2016 and 2017, respectively.

Asia Gaming Briefings | March 2017

22

SOUTH EAST ASIA

22

SINGAPORE

IRs seek revenue drivers as GGR stagnates Record high tourism arrivals are not feeding through to the bottom line of Singapore’s two casinos, with gross gambling revenue expected to be flat for 2017.

SOUTH EAST ASIA

W

23

ith an absence of catalysts for further growth on the gaming side, Marina Bay Sands and Genting Singapore are expected to seek to boost their non-gaming activities and monetize assets, analysts say.

Fitch said in a recent note that Singapore government is unlikely to issue more licences as the returns on investment of new casinos are likely to be poor – given the weakened GGR and increased regional competition.

“Tourist arrivals and receipts – an important consideration for the government – have improved in 2016 with increased spending in shopping, accommodation and food & beverage, offsetting weakness in gaming.

A more likely scenario is for existing operators to be allowed to increase non-gaming capacity,” it said. For Q4, Marina Bay Sands posted better-than-expected profit, generating $723 million in revenue and $366 million in property EBITDA, topping the consensus for $718 million in revenue and $355 million in EBITDA. Buckingham Research said the stand out performance in the quarter was an 8 percent increase in RevPar, helping to offset weaker gaming figures. VIP volumes fell 18.4 percent year-over-year in the final three months of last year, and mass volumes dropped 2.6 percent.

VIP was up 13.8 percent sequentially.

However, it was management’s comments on a subsequent conference call that garnered the most attention.

GROSS GAMING REVENUE Y16 VIP

-12%

Y16 Mass

-29%

Y17E

+2%

Y17 VIP

+3%

Y17 Mass

+2%

Y18E

+3% (Source: UBS)

FITCH 2017E SGD 5.7b

The group confirmed it is in active talks to sell a stake in its Singapore mall.

About 49 percent could potentially be sold off in the first half of this year, with proceeds expected of about $3 billion to $3.5 billion.

Nothing is finalized, though the company said interest had been high and negotiations and due diligence are ongoing.

For the overall market, Fitch is projecting flat GGR of about SGD$5.7 billion for this year, held back mainly by the weak VIP sector. That’s despite strong tourism figures, showing healthy growth in arrivals from mainland China.

“

A more likely scenario is for existing operators to be allowed to increase non-gaming capacity.

”

While visitor arrivals grew 7.7 percent to 16.4 million in 2016, tourism receipts rose even higher, increasing 13.9 percent to SG$24.8 billion (US$17.5 billion) in 2016.

China ranked highest in tourism receipts, growing 41 percent year-on-year, followed by India, which grew 37 percent year-on-year, and trailed by Indonesia, which grew 14 percent year-on-year. “Tourism receipts from China increased mainly due to a volumedriven growth while Indonesia and India

saw tourism receipts growing on the back of visitors spending more on shopping and accommodation,” said the STB.The number of visitors from China grew 36 percent yearon-year in 2016 while Indonesia and India grew 6 and 8 percent respectively, said STB. The tourism board estimates 2017 tourism receipts to hit between SG$25.1 and SG$25.8 billion, while international arrivals will stay relatively flat at 16.4 to 16.8 million in the year.

Despite the gains in Chinese visitation, Singapore’s VIP rolling chip volume had fallen 30 percent by end September, according to Fitch, while mass was down just 2 percent.

The two IRs have been making efforts over the past few years to reduce their reliance on the VIP sector, but have been held back by the strong Singapore dollar relative to regional currencies, which has made the island an expensive destination for some neighboring countries.

In its Q4 results, Genting Singapore posted revenue that rose 2 percent year-on-year to S$558 million, slightly below expectations.

Bernstein said in a note that the miss was due to a weaker-than-expected performance in its non-gaming segments. Net gaming revenue came in at S$399 million, up 7 percent while while non-gaming revenue weakened to $159 million, down 8 percent as visitation to attractions declined. The main thrust of the company’s conference call with analysts was its ambitions for Japan rather than any new initiatives to drive growth at home.

STC gets new head The Singapore Turf Club has seen a change at the top, after long-time president and CEO Yu Pang Fey stepped down. Chong Boo Ching, who was formerly president of chemicals company DuPont Titanium Technologies, took over March 1. Yu joined the STC in 1988 as deputy general manager and rose through the ranks. Over the years, he played a crucial role in its development into one of the Asia’s best racecourses.

Runner up in gambling per capita losses Singapore was listed as the runner-up in terms of gambling losses per resident adult in 2016, according to the Economist, citing research from H2 Gambling Capital. Gambling customers lost an average of close to $700 per resident adult in 2016, second only to Australia with about $990 per adult.

Asia Gaming Briefings | March 2017

SOUTH EAST ASIA 24

Y16 Profit RM

MALAYSIA

Genting 2016 Revenue RM8.9b Malaysia RM 5.6b

Growth steady as strategic plan rolls ahead Genting Malaysia, the country’s only casino operator, reported robust results for 2016, despite disruptions from ongoing construction to upgrade its resort and challenging economic conditions at home.

T

he company said its Resorts World Genting property received 20.2 million visitors in 2016, up about 4 percent from the prior year. Day-trippers made up approximately 71 percent of the total visitor arrivals, with the remaining 29 percent being the hotel guests. The occupancy rate at the resorts’ hotels stood at 93 percent in 2016.

Genting is currently in throes of a RM10 billion ($2.4 billion) expansion of its highlands resort, known as the Genting Integrated Tourism Plan (GITP). The revamp is seen as the biggest driver for potential growth at the Malaysian operator. The ten-year plan was first announced in 2013 and foresaw a budget of RM5 billion.

That was subsequently doubled, mainly to account for more spending on theme park attractions.

In its Q4 results release, Genting said the GTIP had “seen great progress in 2016.” The new Awana SkyWay cable car system began operations in December and visitors can now travel up to the hilltop in about 10 minutes.

The initial phase of SkyAvenue lifestyle mall also started operations in December 2016. The lifestyle mall features dining options including famous overseas franchises such as Burger & Lobster, Cafés Richard and Motorino.

Revenue from the group’s Malaysian operations Asia Gaming Briefings | March 2017

for Q4 rose 2 percent to RM1.5 billion, though overall group revenue was flat at RM2.2 billion, mainly due to a lower contribution from U.K. operations due to the weak pound.

The company said it remains cautious about the near term outlook for the leisure and hospitality industry, but remains positive on the longer term. It notes ongoing challenges in Asia’s VIP market as being a near term drag.

TA Securities said the results were above the consensus forecasts, though in line with its own estimates. The firm said management had noted that the progressive opening of development under the GITP will give rise to tax benefits, which may not be evenly distributed every quarter in 2017. As far as capex is concerned, RM3 billion are earmarked to be spent on ongoing development within the GITP program for FY17.

“Management guided that pre-opening expenses could lead to 1-2 percent-points decline in EBITDA margin for FY17. On top of that, we project depreciation would also be another factor pulling down FY17 margin.

Genting will continue to roll out other attractions under the strategic plan over the course of the year, but the main benefits aren’t likely to occur until a major theme park opens, which is now scheduled for 2018.

+6%

+1%

UK RM1.8b

+35%

US RM1.3b

+6%

Malaysia to amend law to tackle online gambling Deputy Prime Minister Ahmad Zahid Hamidi said the Common Gaming Houses Act 1953 will be amended to combat online gambling. A draft of the amendment has been submitted the the Attorney-General’s Chambers and will be tabled in Parliament in March. The deputy prime minister said the increased use of smartphones has made detection of online gambling rings more difficult.

Resorts World Genting to get outlet mall A premium outlet mall is expected to open at the Resorts World Genting resort in the second quarter of this year.

Genting Highlands Premium Outlets is a 50:50 joint venture between Genting Plantations Berhad and Premium Outlets, the outlet division of Simon Property Group. It will feature more than 150 retail locations.

SOUTH EAST ASIA 25

THE MARKETPLACE FOR THE ASIAN GAMING INDUSTRY Market Trends. Quality Products. Networking.

G2E Asia: Informs smart business decisions.

MAY 16 - 18, 2017 THE VENETIAN MACAO A G2E EVENT

A G2E EVENT

PRESENTED BY

PRESENTED BY

ORGANIZED BY SPONSORED BY

www.G2EAsia.com

Asia Gaming Briefings | March 2017

SOUTH EAST ASIA 26

PHILIPPINES

Growth seen slowing as competition rises The Philippines is expected to be one of the strongest growing gaming markets in Asia again in 2017, driven by another major opening in Manila’s Entertainment City, however growth is expected to slow over the longer term in the face of greater regional competition.

A

ccording to Fitch Ratings, the opening of Universal Entertainment’s $2.4 billion Okada Manila should help drive a high single-digit increase in gaming revenue in the country this year. But the firm sees signs the market is maturing, especially in the greater Manila area.

“We expect high single-digit gross gaming revenues in 2017 driven by the opening of the $2.4 billion Okada Manila and the continued economic growth in the Philippines. Longer term, competition from Macau and other Asia Pacific countries will restrain growth,” Fitch said, noting that junket-sourced VIP business makes up about one-third of gross gaming revenues.

The Okada Manila will be the third resort to open in Entertainment City and at 44 hectares will be the largest to date. The operator has pushed back its grand opening until the end of March. It joins Melco Crown Entertainment’s City of Dreams Manila and Bloomberry Resorts’ Solaire. A fourth IR from Travellers International Group will round out the offering in the zone, although its opening has been delayed to 2020.

Both Melco and Bloomberry reported strong gains in adjusted EBITDA and revenue for their most recent reporting period. City of

Asia Gaming Briefings | March 2017

Dreams posted a near 80 percent gain in Q4 revenue, while Bloomberry’s overall revenue for Q3 was up 11 percent, with its mass table drop jumping 61 percent. Travellers also reported a robust 14 percent gain in gross gaming revenue from its existing Resorts World Manila property, despite concern of cannibalization from the newer Entertainment City resorts.

New licenses?

Bloomberry has said it is interested in building a second casino in the greater Manila area, planning a $418 million investment in Quezon City. Aside from this, Joe Pisano, CEO of Jade Gaming Group says he doesn’t expect market regulator Pagcor to issue new licenses for smaller properties around the capital.

The Philippines is one of the few markets in Asia where locals are allowed to gamble, which is a key part of the attraction. However, tourism arrivals have also been steadily growing and the government is targeting a doubling of the current numbers by the end of 2022.

The country had 5.96 million arrivals in 2016, just shy of its six million target, but an 11.3 percent gain from the prior year.

Countries from Asia made up 60.56 percent

of the total visitors or 3,613,725 arrivals. East Asia filled more than half of total volume with 3,040,860 arrivals, while the remaining fragments came from ASEAN with 461,698 arrivals and South Asia with 111,167 arrivals.

Korea was the biggest source market last year, but China rose to the third position amidst a thaw in political relations between Manila and Beijing.

China arrivals jumped 37.65 percent and tourism officials are targeting 3 million Chinese arrivals this year. On a visit to Beijing in October, tourism officials from the two countries signed a Memorandum of Agreement on Tourism Cooperation.

Improved air connectivity with China is also expected to boost arrivals, with several direct flights to different regions of the country launched last year.

Since November, Laoag has been welcoming around 400 Chinese tourists per week through China Eastern Airlines’ Guangzhou-Laoag chartered flights. Philippine Airlines (PAL) also took its maiden flight from the Changi International Airport to Cebu in December.

As a result of improved infrastructure and transport links, regional casinos are reporting healthy growth.

SOUTH EAST ASIA 27

ESTIMATES Y16E P135b Y20E P270b

GGR Q3 P39.74b +11.2% 9-Mo to Sept P118.26b Pagcor income from gaming ops.

2016 P53.3b

Meridien told to cease numbers game

Courtesy of Julius Santos

“

There have been several headlines that the new administration is restricting the gaming industry but for most operators this is an indication of Pagcor’s focus on compliance of regulations and in the long run this is a good thing.

”

“Outside of the metro many areas have invested heavily in infrastructure on roads and airports facilities and this has driven both business and tourism to provincial destinations,” said David Lawrence, vice president of gaming operations at Widus International. “There have been several headlines that the new administration is restricting the gaming industry but for most operators this is an indication of Pagcor’s focus on compliance of regulations and in the long run this is a good thing.”

Widus operates a casino in the Clark Freeport Zone, which was formerly home

to a U.S. air base. There are another three casinos operating in the area, though Pagcor has recently shut down two properties.

Lawrence said improvements in transport links had boosted visitation both from the surrounding areas and from international markets. As a result, the group is expanding its property. “Tourists are attracted to this are due to the safe, relaxed and clean environment and offerings such as golf, scenery,” he said. “Here in Widus we have seized the opportunities these changes offer.

The hotel and casino was expanding in 2014 and in late 2015 we announced our intention to invest U$100 million, this plan includes a $60 million flagship Marriott hotel which broke ground last year and will open in the second half of 2018.”

“The remaining commitment will be invested in facilities such as a water park and casino expansion. Knowing your market and investing appropriately are the keys as the Philippine market grows and we intend to continue to lead this growth,” he said.

Further regional expansion is expected in the Philippines, though Pisano says there will still be a minimum investment requirement of $300 million.

Meridien Vista Gaming Corp. has been asked to immediately stop its numbers game operations, as it is only authorized to operate within areas covered by the Cagayan Economic Zone Authority (CEZA).

The crackdown comes as part of the Philippine Charity Sweepstakes Office’s latest campaign to tackle the growing illegal numbers game operations which have been siphoning revenue away from the governmentsanctioned Small Town Lottery.

Casinos near inclusion in AML laws The Philippines House of Representatives has moved closer to including casinos as part of its Anti-Money Laundering Act (AMLA), according to media reports. In February, Eastern Samar Rep. Ben Evardone, who chairs the committee on banks and financial intermediaries said his panel has “agreed in principle to endorse the inclusion of casinos in the law.” A small group has been tasked to consolidate three related bills, with the main issue to be resolved being the threshold that would trigger the filing of a suspicious transaction report.

Asia Gaming Briefings | March 2017

SOUTH EAST ASIA 28

Courtesy of Julius Santos

TIGER RESORT LEISURE AND ENTERTAINMENT The Philippine’s largest integrated resort Okada Manila has pushed back the date of its grand opening to the end of March.

Tiger Resort Leisure and Entertainment, operators of the $2.4 billion casino resort held a soft opening on Dec. 21, and officially commenced casino operations on Dec. 30.

“Since that time the construction focus has been on the VIP casino floors, restaurants, world-class fountains and other facilities in preparation for the grand opening,” said the property in its press statement.

The resort will feature two Y-shaped hotel towers with a total of 993 rooms, a 37,464 square-meter dancing fountain, a casino floor with about 500 table games and 3,000 electronic gaming machines, a 90,000 squarefeet nightclub and beach club entertainment complex. It will also have an 8,409 squaremeter retail promenade, a world-class spa and 21 self-operated restaurants for casual, buffet, and international dining.

CITY OF DREAMS The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Crown Entertainment’s local unit. At the end of Q4, the resort was operating 272 tables and and 1,686 Gaming machines. The table games win per unit per day was $4,576. In Q4 revenue surged to $144.7 million from $80.9 million in the fourth quarter of 2015, while adjusted EBITDA gained to $50.2 million from $15.5 million. Rolling chip volume totaled $2.1 billion for the fourth quarter of 2016 versus

Asia Gaming Briefings | March 2017

US$1.3 billion, while the mass market table games drop increased to $149.0 million for the fourth quarter of 2016, compared with $106.3 million.

City of Dreams Manila has six hotel towers with approximately 950 rooms in aggregate, including VIP and five-star luxury rooms and high-end boutique hotel rooms, a wide selection of restaurants and food & beverage outlets, a 4,612.44 square meters family entertainment center in collaboration with Dreamworks Animation, a live performance stage, two international nightclubs and a multi-level car park. It includes an approximately 260 room Crown Towers hotel, Hyatt City of Dreams Manila, a 365 room hotel managed by Hyatt International Corporation and Asia’s first Nobu Hotel with 321 rooms.

RESORTS WORLD MANILA Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, is the owner and operator of Resorts World Manila. The company posted a 153 percent gain in net income in Q3, helped by a 14.2 percent rise in GGR to P6.2 billion.

The non-gaming businesses, which include hotel, F&B, and other revenues, contributed about P859.2 million in the third quarter, increasing by 2 percent year on year.

The hotel room count for the group’s three hotels (Maxims Hotel, Remington Hotel, and Marriott Hotel Manila) remains at 1,226. Phase 2 at RWM is nearing completion with the addition of 228 rooms in the Marriott West Wing in Q4. Phase 3, which will consist of three hotels, Hilton Manila, Sheraton Manila Hotel, and Maxims II, will be completed by 2018. It will also include an additional gaming area, new retail spaces and six basement parking

decks. PAGCOR has approved new gaming capacity of 420 gaming tables and 4,148 gaming machines at the resort.

Travellers says its expansion plans are “in full swing.” A bridge linking the complex to the international airport is expected to open in the first half of 2017.

BLOOMBERRY RESORTS Bloomberry Resorts posted record results in the nine months through to end Sept., with gross gaming revenues at its Solaire Resort & Casino up 14 percent to a record P28 billion, while non-gaming revenue grew 24 percent to P1.7 billion. Net profit for the period was P1.6 billion, a significant upswing from a P1.5 billion net loss in the previous year.

Solaire is a 16-hectare gaming and integrated resort complex along Asean Avenue in Parañaque City. The Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including approximately 6,000 square meters of exclusive VIP gaming areas), with approximately 1,400 slot machines, 295 gaming tables and 88 electronic table games. Bay Tower has 488 hotel rooms and 15 specialty restaurants. Contiguous to the existing Solaire Resort and Casino, the Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines. It also includes a certified 1,760-seat lyric theatre.

The company has said that it plans a second resort in Quezon City with an investment of $418 million. It has also previously expressed an interest in bidding for a casino license in Japan. A deal to exit its operations on Jeju island in South Korea through a sale to Iao Kun Holdings recently fell through.

SOUTH EAST ASIA 29

Asia Gaming Briefings | March 2017

FOCUS 30

Living the stream If you’ve paid a visit to any of the major gambling exhibitions in the past few years it’s clear that live casino is viewed as the future of online gaming, supplanting software-generated games dictated by RNGs. It’s the realism and transparency that appeals to players.

I

t’s the realism and transparency that appeals to players. Cambodia has wasted little time becoming a live casino hub in the Far East with increasing numbers of casinos installing cameras and the necessary tech to cater to remote gamblers – particularly in China. Cambodia boasts nearly 70 licensed brickand-mortar casinos, with the majority clustered in the coastal resort of Sihanoukville, the border town of Bavet near Vietnam and Poipet on the Thai border. By law, the Kingdom’s casinos are off limits to Cambodians, so live casino is a way of diversifying revenue streams.

Yet with many properties lacking the experience, know-how and equipment to offer online games, some have turned to white label live casino providers like Asia Live Tech. “We wanted to come up with a full package available to clients who didn’t want to have more than one partner for their needs, thus saving time, energy and money whilst ensuring efficiency and low costs,” says online marketing manager Neph Vargas. This has also been aided by fast-improving internet connectivity and IT infrastructures. “It is easy to forget but a lot of the countries of the region were badly connected, stopping people from accessing their favorite games,” says Vargas. “But with better infrastructures appearing along the years, it [live casino] has grown exponentially.”

Lucky89 Group, which owns two casinos in Bavet – Lucky89 and Lucky Ruby – was the first land-based Asia Gaming Briefings | March 2017

operator in the world to establish its own live casino from inside its properties, says gambling consultant Jonny Ferrari. He was previously online marketing director for the company’s online subsidiary, Start Live Casino, and it was his job to license the company’s proprietary online software to casino properties in Cambodia and abroad on a profit share arrangement. “The law has changed so just by default they [Cambodian casinos] get an online gaming license but they don’t know what to do with it,” he explains. “Often, they end up losing their money if they try… 99 percent of casino workers and CEOs don’t have a background in online gaming.”

Start-up costs According to Ferrari, who runs consultancy Global Gaming Network from his base in Sihanoukville, it can cost a property anywhere up to $500,000 to launch a professional live casino operation from scratch. That includes all the HD webcams and IT equipment for live streaming, quality software, payment processing and the hiring of tables, dealers, multilingual support staff and programmers. A more basic arrangement costs considerably less, though some operations have flopped due to substandard or, in some cases, overly ambitious and cumbersome setups. If done right it shouldn’t take long to recoup the initial outlay if a site can recruit and

FOCUS 31

retain enough online players. It is estimated that successful live casinos in this part of the world easily rake in six figures a month.

In China, where gambling is illegal, the underground live casino industry is “booming”, says Ferrari. “China is the number one customer of Cambodian live casino. Nine times out of ten it is an entity or individual from China who will approach the Cambodian casino and, through a legal loophole, rent space, which might be $8,000 a month per table and a minimum of four tables. So there will be a few Chinese guys in there who speak no English with a bunch of cameras on four to six gaming tables, and no one [land-based patrons] can play on these tables.” Agents then recruit online gamblers by word of mouth and by dishing out business cards in bars and clubs in China and elsewhere.

The websites typically come with obscure addresses packed with a jumble of numbers, such as 957888win.com. “It’s like they made domain names hard to remember just to be elusive,” says Ferrari.

What is clear, though, is that Chinese and Asian gamblers tend to prefer the realism of live casino and the ability to chat with dealers. Simulated online games with pixels and RNGs are often treated with skepticism and mistrust. And while live casinos in the West are ordinarily run from hi-tech studios impersonating brick-and-mortar casinos, establishing a live casino operation in the pits of an actual licensed casino in Cambodia with patrons walking around and gambling in the background all adds to the authenticity. More importantly, though, it forges trust. “The studio setups can’t compare,” Ferrari suggests. “It takes away from the whole realistic look [of a

casino], which is the whole point. When you have a dealer who is stood there and doesn’t start moving until you log in, it just seems fixed. What matters most is the integrity and that’s what the players look for.”

Quick to spot a lucrative opportunity, Chinese investors have flocked to invest in Sihanoukville casinos ostensibly because of the chance to offer live casino gaming in the region to their compatriots back home. Back in China, the government’s anti-corruption

“

Everyone plays here, especially the Chinese. And there is a Chinese community in every country.

We are talking about hundreds of millions of potential customers.

”

crackdown two years ago led to a sharp drop in the number of high stakes gamblers heading to Macau to wager in VIP rooms.

So live casino allows players to get their baccarat fix without leaving home. As well as staples like baccarat and roulette, most offer Asia-centric games such as Sic Bo, Fan-Tan, Dragon Tiger and Xoc Dia. Many sites have bet limits of $5,000, although in Asia Live Tech’s experience the ‘whales’ aren’t regulars.

“High rollers are not uncommon,” says Vargas, “but live casinos are not where you are likely to find them in our experience.” Even so,

he says there is more than enough appetite in live casino, particularly from emerging markets like Vietnam and Indonesia, to send the industry firmly in one direction – and that’s upwards. “It will boom, that will be guaranteed,” says Vargas. “Everyone plays here, especially the Chinese. And there is a Chinese community in every country. We are talking about hundreds of millions of potential customers.” Meanwhile, the dozen of casinos operating in Bavet could be forced to ramp up efforts with live casino because of Vietnam’s pilot program to allow locals to gamble in two casinos at home.

And yet, much to the bewilderment of Ferrari, the Cambodian government is missing out on vital tax dollars (the state collected $37.4 million in taxes from licensed casinos in the first nine months of 2016 – up from $34.7 million for the whole of 2015). “All of this going on and nothing is being taxed,” he states emphatically. “The country would be so rich if it was – it’s like Iraq and how oil does or doesn’t benefit the country. Live casino and sportsbetting is Cambodia’s oil and the people aren’t getting any of it.”

Besides Cambodia, the Philippines has become the continent’s hotbed for live casino in recent years. As well as large Far East-based gaming suppliers, a number of European companies, including heavyweight igaming supplier Playtech, have purpose-built studios in the capital, Manila.

Western live casino providers like Playtech use their operations in the Philippines to appeal to Asian gamblers by providing operators and their players with a regionalised gaming experience, including multilingual Asian dealers and table games popular in the region.

Asia Gaming Briefings | March 2017

FOCUS 32

On shaky ground Online gambling operators in the Philippines are facing a lack of clarity and regulatory confusion amid President Rodrigo Duterte’s clampdown on unlicensed sites.

S

ince coming to power in June last year, Duterte has caused no end of confusion for online gambling operators plying their trade in the country. Back in December, he announced plans to pull down the shutters on iGaming sites, claiming they had no positive impact on the economy.

Days later he clarified his stance, saying it only appli ed to unlicensed, or illegal operators not paying statutory taxes. He then gave the green light to launch the Philippine Offshore Gaming Operator (POGO) program, allowing the regulator to issue 35 licenses to iGaming businesses for the first time and in direct competition to existing online licensor First Cagayan.

Since then, Duterte has upped the ante on unlicensed sites with executive order EO 13. The order directs the Philippine National Police and National Bureau of Investigation to act at the behest of and other licensors such as First Cagayan to hunt down and prosecute illegal gambling syndicates and unlicensed operators, including online sites.

From the confusion has emerged some level of clarity – licensed operators can continue to offer online gambling products to players, while unlicensed businesses can either get with the program or be forced to exit the country via a showdown with lawmakers in court. But that is taking a somewhat simplistic view of the situation.

The impact of Duterte’s crusade is being felt even by those who hold the necessary online gaming permits.

While those licensed by Pagcor and/or First Cagayan remain out of the firing line for now, many operators are still enduring sleepless nights over what the President will do next and for how long their licenses will remain valid.

“If an online operator has a signed service provider agreement with a POGO they will be ok,” says one industry insider. “If they haven’t, they should either be looking to sign up with one right away or move out of the country. This option is being looked at by several operators viewing the option of relocating in Taiwan and Vietnam.”

Uncertainty is also coming over the long-term role of First Cagayan now that Pagcor is supplying online licenses, with some operators opting to switch from the former to the latter. While there is nothing illegal about operating online gambling sites under a First Cagayan permit, the issue is where those operators are located.

“They should be in Cagayan, and by and large they

Asia Gaming Briefings | March 2017

are not,” says the industry source. “Most if not all are operating from Cagayan Economic Zone Authority (CEZA) buildings in the Central Business district of Makati. This leaves them vulnerable to closure by local authorities and by the NBI rather than by itself,” they add.

A source close to First Cagayan refutes these claims and says it has been issuing new, and renewing old, licenses since the President came to power.

“We continue to issue and reissue licenses, granting approval to 13 operators and suppliers since June last year,” they add.

Operators remain concerned, however, particularly after Duterte claimed the scalp of PhilWeb founder Roberto Ongpin. PhilWeb’s business in eGaming and which is different to iGaming, in that it is local and venue based, held a valid Pagcor licence. Despite this, Ongpin was forced to sell his stake in the business after PhilWeb was not allowed to renew its franchise after expiry in July 2016.

Following Ongpin’s departure, PhilWeb is anticipating a new franchise might be granted, but one that will no longer be exclusive. The company remains a shadow of its former self, however. Prior to Duterte’s announcement last year, PhilWeb operated 257 franchises across the country, the majority of those

FOCUS 33

that remained open have since switched to the INSTAWIN platform.

“They have been stagnant since Ongpin’s departure,” the source says. “At present, it should be assumed they are preparing to enter a bidding war for what is understood to be two new electronic gaming licenses to be issued by . This is anticipated to be a public bid with the full details and structure still being developed at . We would expect details to be released in March or possibly at the beginning of the 2nd quarter.”

Alternative regulators The ongoing uncertainty, driven by Duterte’s unpredictability, is causing some operators and suppliers to consider applying for a licence with established regulators outside of Asia.

Meeting the standards set by regulators in mature markets such as Europe is considered by some to mitigate the risk of operating in the Philippines under local licenses.

Susan O’Leary, director of eCommerce at Alderney, says the Alderney Gambling Control Commission received an influx of

enquiries during last month’s ICE Totally Gaming from Asian, and in particularly Philippine, enterprises.

“We had a lot of interest from operators and suppliers based in the Philippines concerned about the recent changes in respect of online gambling regulation in the country.

They want to ensure they are running their businesses to the highest possible standards while seeking additional protection from the instability and unpredictability of the Philippine market at present. To do this, they are turning to experienced regulators in mature markets, like the AGCC, as an alternative option.”

It could be argued, then, that the current regulatory framework in place for licensing online gambling operators in the Philippines is unable to keep pace with market demands.

Duterte’s decision to allow to issue POGOs was certainly a move in the right direction, but the incumbent systems and processes need to be overhauled if they are to be truly effective – particularly when it comes to shutting down unlicensed sites.

“The current regulations need improving,”

says the source close to First Cagayan.

“Foreign investors including online gaming operators look for predictability, consistency and continuity before a country becomes their jurisdiction of choice. If things don’t change, we will see businesses migrate to other jurisdictions such as Cambodia, Laos and Vietnam.”

Game changers But not everyone agrees that the current system is unfit for purpose. Rodney Hall, chairman of Bromhead Holdings, says POGOs have been a real game-changer for online operators in the country, and that the regulator has already made a start on upgrading its framework to ensure it is clear, concise and robust.

“The establishment of POGO is a significant step for towards a well-regulated industry with a safe and permanent home in the Philippines. We are working with several companies now to establish their bonafides as service providers under the new POGO platform,” he adds.

Asia Gaming Briefings | March 2017

34

AUSTRALASIA

34

AUSTRALIA

Crown’s homecoming Crown has recently re-focused its efforts on expanding its Australian business in the wake of the Chinese VIP crackdown and the arrest of 18 of its employees on “gambling related” charges.

C

rown Resorts has bucked the trend of going global, selling down 155 million ordinary shares in its Melco Crown Entertainment (MCE) joint-venture back to the Macau-based gaming company to refocus on its Australian business.

The sale raised AU$1.05 billion ($806 million), which the operator will use to help finance its ambitious expansion plans on home turf. This includes a new AU$2 billion harbour side resort in Sydney, Crown Towers Perth, and a AU$1.75 billion development in Queensbridge, Melbourne.

The strategic shift comes at a time when Crown’s Australia business is going through a period of decline; total revenues were down 12 percent at its resorts across the country for the first 23 weeks of FY17 driven by a 45 percent dip in VIP revenue over the same period. VIP play represents around 28 percent of Crown’s Australia revenues, but margin is low. The same applies to operators with properties in Asia, where the Chinese clampdown on

AUSTRALASIA 35

casinos and junkets targeting players in the country has driven margin, and revenues, into the ground.

The decline has been worsened by the arrest of 18 Crown employees in China four months ago. The reason for their detention was “gambling-related” crimes, and has sent shockwaves through the Australian market.

The ripples have hit all operators, not just Crown. New Zealand’s SkyCity Entertainment recently reported its interim results, and while its domestic business enjoyed growth, its Australia operations saw revenue decline year-on-year.

The drop in VIP play means Crown is going to have to find growth from elsewhere, particularly from mass and premium mass players – something it has proven to be adept at. Crown enjoys sole licences in Melbourne and Perth, where its proposition is directed towards the local market. “The mass market is the key cash flow generator for both Crown properties; the mass market

has a long-history of stable cash generation and Crown has recorded positive EBITDA growth in each of the previous 10 years,” says Vicky Melbourne, senior director at Fitch Ratings. But this sits at odds with its planned Crown Sydney project as its license only allows for VIP gaming facilities. Resorts such as this were planned well before the Chinese clampdown and resulting fall in VIP play. The Sydney project will be in the exclusive area of Barangaroo South, and will include a six-star hotel with 350 hotel rooms and suites, signature restaurants, bars, retail outlets, pool and spa facilities, conference rooms, a VIP casino as well as luxury apartments. The country’s apartment market is booming right now, particularly in desirable and exclusive locations such as Barangaroo, where prices have more than doubled for properties bought off plan a little over three years ago.

“The apartment development supports the economics of the project and will bring down the overall net cost of construction, as well as contributing to the building’s iconic status and broadening the luxury brand appeal,” says Melbourne. “The apartments in Bangaroo are in Sydney, if not Australia’s, most desirable location and in high demand for those seeking exclusive properties.”

The apartments were initially planned to attract VIP Asian tourists looking for a worldclass entertainment experience, including gambling facilities. The down-turn in VIP casino revenue has some concerned that sales will slump. But Megan Brownlow, partner at PwC, says buyers come from all over the world and with different reasons for buying, but still desire a wide range of entertainment options on their doorstep. “Many apartment buyers, especially those seeking premium destinations such as the Sydney harbour foreshore, come from overseas and are not full-time residents. They visit to see their children who are studying in Australia, for example, and to spend their limited leisure time in the city. “Proximity to entertainment such as restaurants, shops, casinos and so on is an attractive value proposition for many, especially buyers from Asia,” she adds.

Crown is swimming against the tide by streamlining its business to focus predominantly on one market in the face of the decrease in VIP play, with others taking a global approach and leading their operations into new regions.

But Brownlow says Crown’s decision to dial-in on Australia is a sound strategy, with growth still up for grabs in its domestic market.

T OTAL GAMBLING EXPENDITURE All gambling Y14/15 A$22.73b

+7.7%

Sports betting $814,6m

+30.1%

Racing $2.81b

+2.7%

Total gaming (incl. pokies and lottery) $19.1b

+7.7%

Casinos $5.17b

+17.8% (Source: Queensland Treasury)

One Nation opposes ASF casino project Right-wing political group One Nation has taken aim at ASF Consortium’s casino proposal at The Spit, warning it would devastate the region’s community clubs. “Conservatively, 30 Gold Coast community clubs are at significant risk of closure, A$34 million (US$26.1 million) will be ripped out of the community via contributions and taxes foregone, there will be no new jobs created post construction and over 500,000 club members and volunteers displaced,” One Nation Queensland leader Steve Dickson told the Gold Coast Bulletin.

Tabcorp agrees $45m fine in Austrac case Tabcorp has agreed to pay a A$45 million penalty to settle a case brought on by Australia’s financial intelligence agency, local media reports. The Australian Transaction Reports and Analysis Centre (Austrac), filed papers in the Federal Court against three Tabcorp companies in July 2015 for “extensive, significant and systemic non-compliance” with Australia’s anti-money laundering and counterterrorism financing legislation.

Asia Gaming Briefings | March 2017

AUSTRALASIA 36

SAIPAN

VIP ROLLING CHIP TURNOVER Y16 $32.4b Jan $5.6b

IMPERIAL PACIFIC GGR Y16 $0.9b 0 $1b Y17E $1b - $1.4b

Imperial Pacific seeks extension for Saipan project Recent photos of the construction site for Imperial Pacific’s eagerly awaited report on the island of Saipan cast considerable doubt on the possibility for any kind of opening in the first quarter of this year, as was initially planned.

T

he Imperial Pacific Report had scheduled a soft opening on March 31st, though it now appears the company will seek to extend its temporary casino operations at the T-Galleria, potentially pushing out the deadline for completion of the first phase by five years.

Local media cited a letter to the government from Chairman Mark Brown requesting significant changes to the implementation scheduled for the $7 billion project.

The newspapers said he has asked for an extension of the temporary casino operations, which have been averaging about $2 billion a month in VIP roll from April 30th to the end of October this year.

The company also wants an extension of the deadline to complete construction and begin operations from Aug. this year to February 2018; it wants to extend the deadline to complete Phase One from Feb. 2018 to May 2023 and to move Phase 2 from Aug. 2022 to May 2030.

The reasons cited for the request included extensive damage to the site during Typhoon Soudelor, limited cement supply, lack of skilled labor, unpredictable ground conditions and drainage issues.

Imperial Pacific won a monopoly to operate a casino on Saipan in 2014. Shortly after winning

Asia Gaming Briefings | March 2017

the permit, the group more than doubled its planned investment, pledging to spend $7 billion on resort facilities. Many analysts expressed scepticism that the island, with its limited facilities and transport infrastructure, would be able to support an investment of that level. The casino resort will include more than 200 gaming tables and over 350 slot machines.

The 14-storey hotel building will offer more than 340 opulent hotel suites including 15 deluxe villas.

Robust VIP roll The Hong Kong-listed company has been operating out of a temporary facility, which has been generating eye-popping levels of VIP turnover. For 2016, the company reported a VIP roll of $32.4 billion, while for January alone, the figure reached $5.6 billion. Local media also reported that the governor’s office sees the letter as an opportunity to consider amending the license to slow the growth rate of development on the island “to plan for a more sustainable growth rate that allows for the island’s infrastructure, cultural and environmental impacts and other overall economic considerations to keep pace with the economic consequences resulting from the introduction of gaming on Saipan.”

(Source: Fitch)

Saipan mulls 5 percent gaming tax A Saipan legislator has introduced a bill that would impose a five percent tax on all gaming revenues in the CNMI, local media reports. Named the House Bill 20-31 and introduced by Vice Speaker Janet U. Maratita, the bill would see the new tax come into effect in two years time. “The exclusive license fee that is paid currently is arguably a fair price for a legal monopoly, but even an entity that enjoys exclusive gaming rights should be paying their fair share of taxes,” she was cited as saying.

Fitch assigns no rating to $70m note program Fitch Ratings said it has not assigned a rating to Imperial Pacific International Holdings Limited’s issuance of $70 million 8.5 percent per annum unsecured notes that the company said was completed on 8 February 2017. Fitch said it awaits the finalization of the proposed senior secured notes issuance, which is still not completed and therefore there is no final documentation for the notes available yet.

AUSTRALASIA

Asia Gaming Briefings | March 2017

AUSTRALASIA 38

NEW ZEALAND

Domestic ops drive growth as international business slumps

SkyCity Entertainment Group, New Zealand’s only listed casino operator, is seeing growth in its domestic operations, although its international business has been hit by a drop in VIP traffic.

C

asinos in Australia and New Zealand had initially benefited from China’s crackdown on corruption, which triggered an exodus from Macau to destinations further from Beijing’s radar.

However, a crackdown last year on marketing in China, which saw the arrest of 18 Crown Resorts employees, together with an increased focus on capital controls, have cooled the market.

“The main drivers of the 17H1 performance were solid growth in our combined New Zealand properties, offset by reduced turnover in our

Asia Gaming Briefings | March 2017

International Business, continued competitive and economic pressures in Darwin and a weaker Australian dollar,” said SkyCity’s interim chief executive officer John Mortensen. “Pleasingly however, trading at our flagship property at SkyCity Auckland improved significantly in 17Q2, with strong growth across all business segments,” he said. Overall, the group posted a 2 percent decline in normalized profit after tax to $83.7 million for the period.The international business saw a 38.7 percent drop in turnover to $4.4 billion, while normalized EBITDA was

down 68.6 percent to $7.1 million.

The company blamed the decline on increased restrictions on fund transfers and fewer visits by larger customers, as well as high fixed costs and rising bad debt. It said management is reviewing costs given the decline in activity. “SkyCity continues to comply with all relevant laws in China and take a conservative approach to issuing credit to VIP customers,” it said. SkyCity Auckland, which accounted for approximately 80 percent of group EBITDA in the interim period, is expected to continue to

AUSTRALASIA 39

“

The main drivers of the 17H1 performance were solid growth in our combined New Zealand properties, offset by reduced turnover in our International Business, continued competitive and economic pressures in Darwin and a weaker Australian dollar.

”

deliver modest growth, due to an improving economy and ongoing initiatives to drive visitation. The company has opened its Grand Horizon gaming salons and there has been a refurbishment of the atrium. A new Cantonese restaurant is slated for opening in June.

Revenue at the property (excluding International Business) was up 3.7 percent to

$283.9 million in the half year.

The improvement has come despite ongoing construction work at the property. The New Zealand International Convention Centre and Hobson St hotel projects remain on-budget and on-target for completion in the first quarter of 2019. Excavation commenced in June 2016 and is now over 80 percent completed, the company said. SkyCity Hamilton also saw a 7.3 percent rise in revenue, to NZ$29.6 million in the half year, reflecting a strong local economy. However, the company’s Australian operations were a weak spot. Revenue from Adelaide was down 1.7 percent to A$77.1 million, due to lower table games hold and a reduced contribution from food and beverages.

While the group’s Darwin operation continues to face increased competition from pubs and clubs and a difficult economic environment in the Northern Territory. SkyCity said the situation is not expected to improve in the second half.

The company has appointed Sun International CEO Graeme Stephens as its new CEO. He will take over from Mortensen on May 1st.

Mortensen will take up the newly created role of chief operating officer.

TOTAL EXPENDITURE Y12/13

NZD $2.04b

Y13/14

NZD $2.06b

Y14/15

NZD $2.09b

Y15/16

NZD $2.21b

CASINOS EXPENDITURE Y12/13

$490m

Y13/14

$486m

Y14/15

$527m

Y15/16

$586m

TAB AND SPORTS BETTING Y16

$342m

+5.3%

POKIES SPENDING Y16

$843.0m

+3.1%

Q4

$223.6m

+4.3%

Charity warns of money laundering concerns The Problem Gambling Foundation has warned that money laundering may be behind a sharp rise in pokie spending, despite a drop in the number of machines.

Data from the Department of International Affairs (DIA) showed that New Zealanders spent $223.6 million in non-casino gaming machines in 16Q4, the most since the last quarter of 2008. “We know that participation is down and that spend is up, and spend correlates with harm, so it is something the government needs to look into very seriously,” said Paula Snowden, the foundation’s CEO.

Endorphina withdraws Maori-themed game Endorphina has reportedly taken down its Maori-themed game following protests from community groups, who accused the company of cultural appropriation.

“Maori intellectual property has been used as comforting and familiar inducements, with the potential to lure vulnerable people to online gambling,” Lance Norman, the CEO of Maori health group Hapai Te Hauora was cited as saying.

Asia Gaming Briefings | March 2017

SUPPLIER SPECIAL REPORT 40

ASEAN Gaming Summit spotlights regional opportunities

T

aking place at the Conrad Manila hotel, Philippines, on March 21-23, 2017, the inaugural ASEAN Gaming Summit draws the region’s leading operators, regulators and suppliers over a three-day conference.

From new-style integrated resorts, addressing the premium mass market, to sports betting innovations and online gaming, this event is for anyone with an interest in this dynamic region.

“We came up with the idea for the ASEAN Gaming Summit because we believe that there are other very dynamic markets outside of Macau that deserve attention,” notes Rosalind Wade, co-founder and managing director of Asia Gaming Brief.

“The purpose of the summit is to showcase not only the gaming opportunities in Manila as well as regionally, but also The Philippines as a destination which offers many attractive options for business and leisure travellers.​In addition, we will focus on other emerging jurisdictions in SE Asia and IndoChina, such as Vietnam, Cambodia and Laos, and explore the opportunities and competitive landscape for gaming across Asia,” she added. The event features over 60 speakers covering developments in gaming in both the

Asia Gaming Briefings | March 2017

terrestrial and online space, with around 200 delegates in attendance.

The timing of the event couldn’t have come at a better time. “The gaming industry in the Philippines is growing really quickly. While Macau has reigned in Asia as the top spot for gambling for so many years, places like Entertainment City in the Philippines have become hot spots for gaming tourists. Interestingly, one of the world’s biggest integrated resorts, Okada Manila, is set to open around the time of our conference,” she explains.

Conference delegates are also treated to a number of social networking events throughout the summit, including a gala dinner hosted by the Philippine Amusement and Gaming Corporation (Pagcor) on the Tuesday, a number of cocktail receptions, and a final conference wrap party on the Thursday.

“While we run a number of other events in Asia throughout the year, such as our Asia Gaming Awards held in May, and our AGB Social Events held every few months, when it comes to conferences, we are fully focused on making the ASEAN Gaming Summit a success this year and growing it from there. It has been a long time in the making so we’re all gunning for its success,” said Wade.

41

1st Annual

ASEAN GAMING SUMMIT

UNCOVER NEW OPPORTUNITIES IN SE ASIA CONRAD MANILA, PHILIPPINES 21 - 23 MARCH, 2017

21-23 March 2017, Conrad Manila, Manila The inaugural ASEAN Gaming Summit is designed to help you identify and capitalize on opportunities in the fast-changing landscape of gaming in SE Asia.

Covering both land-based and online gaming, the event draws together the region’s leading operators, regulators and providers who are shaping the future of SE Asian gaming.

CONFIRMED SPEAKERS INCLUDE: AGTECH | DONACO INTERNATIONAL | HA TIEN VEGAS | HERO POKER | MIURA HOLDINGS | MORGAN STANLEY | NAGACORP | NSW DEPT OF JUSTICE | OKADA MANILA | PADDY POWER BETFAIR | PAGCOR | PLAYSTUDIOS | RESORTS WORLD MANILA | SOLAIRE RESORT & CASINO |THUNDERBIRD ASIA

Official host

AGENDA-AT-A-GLANCE: Conference Day One, Wednesday, 21 March 2017: Casinos & Integrated Resorts • Regulation, Tourism, Infrastructure • ASEAN - The Big Picture • Regional Developments & Competition Conference Day Two, Thursday 22 March 2017: Omni-channel • Marketing & Growth Strategies • Technology & Game Design Innovations • Land Based/Online Convergence Conference Day Three, Friday 23 March 2017: Online & Mobile Gaming • Regulation & Trends in Sports Betting • New Products & Innovation • Marketing & Customer Acquisition

Sponsors

Platinum Sponsor

www.aseangaming.com

SUPPLIER SPECIAL REPORT 42 ALDERNEY

ALL-IN TRANSLATIONS

Regulating for success

Breakthrough year

What kind of trends do you foresee in Southeast Asia?

I am of the view that over the coming months and years operators both targeting Asian countries and based in them will seek to be licensed and we will also see a growing number of countries, lawmakers and regulators establish clear, concise and robust licensing frameworks.

Asia has the potential to be the largest online gambling market in the world; for those looking to build a sustainable, long-term business, licensing now is the only way forward.

To do that, key decision makers need to work with established regulators such as the Alderney Gambling Control Commission (AGCC) to better understand what components are required to build a powerful yet flexible framework, and the high standards operators and suppliers should adhere to. For those currently plying their trade in the Asia region, regulation is an absolute must; if not they leave themselves exposed to geopolitical factors and increased risk that could sink their business. The AGCC always has its door open to new partners, and has the knowledge and experience required to help operators and suppliers navigate the choppy waters of the Asian online gambling industry.

How is your company responding to these trends?

We are constantly assessing our framework to ensure that regulation through Alderney remains an attractive and commercially sound proposition and that the regulation itself is fit for purpose.

Our innovative licensing regime allows for B2B operators to be licensed

by Alderney without having their servers located there too. This is particularly attractive to Asian operators and suppliers, ensuring they can achieve the AGCC’s gold-standard licence - and the benefits that brings to their business - but remain Asia Gaming Briefings | March 2017

in their headquartered jurisdiction. Asian regulators are unable to offer the same levels of security and peace of mind as established regulators in mature markets.

Alderney is an authority when it comes to regulation and licensing – its framework is more than 16 years in the making and considered to be among the best in the industry. Asian iGaming businesses would be wise to look into what it can offer them, and why licensing now will be key to the success of their business in the long-term.

What products are you currently offering in the Philippines / Asia?

Anyone licensed by the AGCC, and that includes operators and suppliers in the Philippines and Asia, gain access to a wide variety of benefits. They can sleep easy nowing they are compliant with internationally recognized standards and best practices, while opening the door to additional perks such as potential partnerships with other licensed B2B and B2C operators, as well as access to additional banks, financial institutions and payment processors.

Those who decide to locate their businesses in Alderney, and its larger sister island, Guernsey, enjoy a low-to-zero tax economy, and our framework is endorsed

by Moneyval and FATF in terms of full compliance with international AML and CFT standards. We are a 40-minute plane ride from London, and we straddle the main EU/US cables. Those licensed in our jurisdiction for the first time also benefit from a 50 percent fee reduction for the first year. In Asia, there is a lot at stake; the market offers huge untapped potential for operators and suppliers, but pitfalls aplenty. That is why regulation and licensing should be embraced and not feared. When done properly, it allows businesses to spread their wings and fly, and that is exactly what the AGCC has been helping operators and suppliers to do for more than a decade and a half.

What kind of trends do you foresee in Southeast Asia?

Acting as language service provider to the gaming industry, our approach is obviously centered on languages, and we’ve already witnessed an increase in demand for Asian languages over the past few years from our European facing clients.

We only expect this demand to rise as the market continues to grow and show opportunity.

We are also seeing a higher demand from Asian facing companies, working with a mixture of start-ups, developers and operators, many of whom are based out of the Philippines and Taiwan and who plan to enter both the Asian and European online gaming space. We’ve also seen a rise in traditional land-based clients undergoing localization for the online market.

How is your company responding to these trends?

Logistically, we are constantly hiring more gaming and sports savvy translators and writers for languages like Thai, Khmer, Tagalog, Malay and Vietnamese, in addition, to Chinese, Japanese, etc. Furthermore, we are working systematically to upgrade our terminology for “new” products like Fantasy, Virtual and eSports. We have been working with Asian gaming localization for almost a decade, and the demand has never been higher than now.

In terms of marketing, our presence in Asia has grown steadily over the last few years. You could say it officially started in 2014, when we became a language service provider for the Macao Gaming Show and exhibited there. In 2015, we arranged a successful gaming dinner during the Affiliate World Congress in Bangkok, and in 2016 we hired a Taiwan-based business development manager for Asia and exhibited

SUPPLIER SPECIAL REPORT 43 ARISTOCRAT

Bringing forward innovation and new gaming experiences

at G2E Asia in Macau. It is in 2017, however, that you will see the real Asian breakthrough for All In Translations.

We are hosting the official poker tournament at the ASEAN Gaming Summit and sponsoring the after party. We are doing a promo video together with Calvin Ayre to build up for the tournament, and we are exhibiting again at G2E Asia.

Moreover, I will personally have a base in South East Asia for most parts of 17Q4 and 18Q1, and we are currently looking for local conferences, summits and trade shows to create win-win situations with our event marketing. We very much look forward to the ASEAN Gaming Summit in Manila where our key objective is learning more about the South East Asian gaming market so we can devise further strategies.

What products are you currently offering in the Philippines/Asia?

All of our products are largely focused around gaming and the main one is localization.

At no extra charge, however, we’re also offering advisory support to our clients throughout the localization process. This can involve many things, such as choosing colors, symbols and terms that work better in some areas than others, and we always recommend that developers, operators and others involve a language service provider early in the process to avoid any pitfalls and to maximize potential.

In addition to localization, we are selling more and more content writing to SEO and content marketing teams as well as affiliates.

Other services include voice-overs, language proficiency testing and proofreading/QA. Everything is available in 70+ languages.

What kind of trends do you foresee in Southeast Asia?

We have had a great deal of success with our Lightning Link progressive throughout Australia, the Americas, Europe and it has just arrived in Asia. We expect higher demand in Linked Progressives, and are continuing to bring further innovation into that segment, both in terms of product and game play. Our new Dragon Link title is our next cab off the rank. We showed Dragonlink at recent global trade shows, and the response from operators was very positive.

Next, we will continue to focus on bringing innovation to our line of standalone games for players who enjoy a high line/ high volatility gaming experience. This is a key segment for operators throughout the region. We have responded to our customers’ needs with a solid portfolio of games, and we are committed to further development in this segment.

Next, the growth of mass market gaming is an interesting trend that we, and our customers, are keenly aware of. Players enjoy new gaming experiences, gameplay and visual destinations that are big, loud and bright. We strive to create games for our customers that will be entertaining for players, some of whom may be visiting the casino for the first time.

Lastly, we are also creating games for those who enjoy table games, with the added fun of a slot environment. For this segment, we have created our Games of Fortune; Multiline Baccarat and Baccarat 88 which are played on exciting new cabinets.

How is your company responding to these trends?

We are bringing forward innovation, particularly in the Linked Progressive segment, including an expanded Lightning Link game catalogue and new games such as 5 Dragons Empire, Dragon Link and Mighty Cash.

In the standalone high line/high volatility segment, we have developed games such as 5 Dragons Rapid, 5 Kings, and Fortune King Rapid specifically for players in Southeast Asia.

We are also bringing many new and exciting product offerings to our customers to help them satisfy their players’ demand in the mass market gaming segment. We are proud to populate our market-leading cabinets with outstanding game content, including a wealth of classic Aristocrat games such as 5 Dragons Empire Link, Baccarat 88, Multiline Baccarat and many titles and themes created specifically for this region. Titles such as Britney Spears Slot Game, Game of Thrones Slot Game and 5 Dragons Grand bring extra excitement to the casino floor. In Aristocrat’s Behemoth cabinet, which is large enough for two players to enjoy, we have a great deal of game content created specifically for Southeast Asia operators including 5 Dragons Gold, Fortune King Gold and many other Aristocrat classic games.

For players who enjoy a more entertainment-style gaming experience, we are responding with games in our E*Series line such as Extra Bonus Wilds, Gold Stacks and Spin It Grand which builds on the success of Super Wheel Blast.

What products are you currently offering in the Philippines / Asia?

Lightning Link is a truly global sensation and we are very excited to bring Lightning Link and 5 Dragons Rapid to market in our Helix cabinet, a cabinet which both operators and players have responded to very positively. Fulfilling on our commitment to emerging segments, we are also offering our line of Baccarat inspired Games of Fortune as well as 5 Dragons Empire Link.

We look forward to these games and cabinets adding to the enjoyment we bring our customers’ players and to the success they bring for our customers.

Asia Gaming Briefings | March 2017

SUPPLIER SPECIAL REPORT 44 ARUZE

Significant increase in mass gaming

BETCONSTRUCT

Sports betting trending up, fun interface key

What kind of trends do you foresee in Southeast Asia?

We expect a significant increase in mass gaming markets in Southeast Asia over the next two to three years. This is not limited to the Philippines, Malaysia, and Singapore however, as we are seeing an increasing market in areas such as Vietnam, Thailand, and Cambodia just to name a few jurisdictions. There should be an increased interest in not only slot titles, but also for electronic table games, which allow players to become accustomed to table games in an easy and affordable way.

How is your company responding to these trends?

Aruze Gaming has always had a focus on Asia. It will be interesting to see how our titles work differently even within Southeast Asia. The titles which perform the best will not always be the same as Macau or Singapore, so we will continue to look for the best balance in game math and themes for these new markets. Aruze has an advantage in that we have an R&D team permanently based in the Philippines, aside from our Japan and US R&D teams. We also have team members permanently based in the Philippines, Malaysia, and Singapore, and frequently visit Southeast Asian countries for installations or just to check the market in general. We will continue to foster our relationships with our customers in those regions, while also looking to expand and strengthen our presence in new markets.

What products are you currently offering in the Philippines / Asia?

Almost all of the Aruze game library is available in the Philippines and Asia. Whether it is link progressive slots or electronic Sic Bo tables, we have the products in the Asian market. I would say with confidence that a more diverse variety of titles are more readily found in Asia than in any other continent. This is due to the market diversity within Asia, and also to the casino operators’ willingness to challenge the market with new products. We have a strong focus on electronic table games in Macau, link progressive products in Malaysia, and of course products designed specifically for the Philippines.

What advice do you have to anyone looking into this market?

In general, it is important to look at each level of gaming to fully understand what is going on. All gaming suppliers do as such, possibly without even knowing it. What works in Asia? What works in Southeast Asia? What works in the Philippines? What works in large resort casinos? What works on the main casino floor of a resort casino in Manila? There is someone looking into every level of gaming performance, and it is important to have a reach and understanding into each level. Trends are just patterns of individual occurrences, but each occurrence is a big deal for any slots manager or floor attendant. There is always a hint in every bit of feedback we receive, and it is up to us not miss those hints.

Asia Gaming Briefings | March 2017

What kind of trends do you foresee in Southeast Asia?

The Southeast Asia market tends to favor live casino, and more specifically, live Baccarat. However, the market is also trending towards sports betting and casino games, which is quite interesting. While players have become accustomed to both online and land-based Baccarat for many years, with developments in mobile devices and internet connectivity, players are trying new games and in new markets.

The increase in popularity in online and mobile betting is also important to note. Players are more likely to use their short, free time to engage in mobile betting. Players are looking for “fun”, rather than just a vanilla betting experience on mobile. This leads us into the third trend, which is that players pay attention to the user friendly design and interface in their games.

How is your company responding to these trends?

Firstly, Betconstruct ‘s vision is always providing our partners with a full range of products, and tools to manage them in a single platform.

This fits in with the first trend, in that partners can easily find industry leading sportsbooks and casino games from our platform, making these products easy and flexible to integrate and use.All of our newest major products and games are written in HTML5, which means it can be viewed across all platforms and devices and it’s easy to integrate into current applications or websites.

Not only does our technology respond to the trends but our game design is also made to satisfy players when they are using their mobile

SUPPLIER SPECIAL REPORT 45 EZUGI

Localization and innovation to drive growth

to play. The mobile-dedicated interface and functions will guarantee that we follow the trends in Asia market.

What products are you currently offering in the Philippines / Asia?

We are offering our industry leading sportsbook with more than 30,000 live matches and 40,000 pre-matches every month. We have more than 3000 casino games on our platform which includes top game providers in industry like NetEnt, Microgaming, iSoftbet, NYX, Playson and others. In Asia, we also have our own live casino which includes Baccarat. For players more interested in controlling their luck, we provide poker and skill games. Our partners have the ability to run games 24/7, with our virtual sports betting and virtual games, while colossus pool betting and fantasy sports make the sports-related products line complete and interesting. The single back office tool is also very important product we provide to our partners in Asia. With this tool, partners will have the ability to manage all things easily and clearly. We bring our easy to integrate and customizable services to our Asia partners as well. The 24/7 B2B and B2C customer service will be a great support to partners’ operations as well. All our products and services are aiming to help our partners grow fast and healthy together.

What kind of trends do you foresee in Southeast Asia?

The popularity of live gaming for the player lies in the transparency, interaction and emotions that replicate the live land-based casino environment.

However as the market and product adoption matures, players are become more demanding. Localization and innovation, therefore, becomes a differentiator for the operators and their live casino software providers in driving the creation and execution of new products, services, and business processes. Strategic insight into the localized Southeast Asian market is a prerequisite. This needs to include player behaviour requirements, such as cultural nuances and live gaming casino themes, as well as psychographic and attitudinal segmentation.

On a macro-level, the regulatory and game certifications are important factors including the distribution of the gaming software within the supply chain to the end players. For example, most online casinos now offer Live Blackjack, Live Roulette, Live Baccarat, Live Sic Bo and Live Dealer Poker as the standard product set deployed across desktop and mobile devices. But that isn’t innovation or differentiation, that’s merely making your product accessible by delivery channel. The casino customer and user experience is central to the engagement and usage and, therefore, must be different for different devices, platforms and population groups – it’s an omni-channel, multi-product precise delivery that is required, as opposed to a one-size fits all approach.

How is your company responding to these trends?

We believe that over the next couple of years the focus will be on mobile and its use will soon overtake desktop.

The Ezugi Live Gaming network offers all the popular casino games on our live dealer gaming platform, including Baccarat, Blackjack, Hybrid Blackjack, Roulette and Sic Bo. In terms of innovation, we continually ensure the development of games that bring players from a land-based and online environment together at the same table. CRM tools such as bonus mechanisms are critical for operators. Ezugi has developed various bonus tools. Also, the interface and dealer’s real-time interaction delivers the closest experience to being in a real casino. In addition, due to our wide network of studios, Ezugi is able to meet the recent demand for private-branded tables. It is, therefore, critical that operators partner with live dealer providers that are not only able to design, test and deploy new games and feature sets into the marketplace on a regular basis, but who also provide access to exclusive live gaming content.

What products are you currently offering in the Philippines / Asia?

Ezugi sees product localization as a key to enter to each market.

Regarding Asia, Ezugi has added two additional locations, both from land-based casinos in Cambodia, where we are offering proxy Baccarat tables. This product appeals even more to the Asian market, and we have also developed other baccarat game versions such as Knockout Baccarat, Dragon Bonus Baccarat, Baccarat Super 6, and a Sede (Xoc Dia) game for the Vietnamese market.

Asia Gaming Briefings | March 2017

SUPPLIER SPECIAL REPORT 46 FIRST CAGAYAN

JADE ENTERTAINMENT

Niche opportunities

Technology in the driving seat

What kind of trends do you foresee in Southeast Asia?

The regional economies have been able to maintain relative strength over the last five or so years. This overall economic growth seems stable and sustainable enough to continue translating to more disposable income and drive leisure and gaming activities for the foreseeable future. There has been a rapid buildup of resorttype casinos, particularly in Macau, the Philippines, Vietnam and Cambodia and the jury is still out on how long the various regional markets will need to digest the new supply. However, there could be interesting pockets of opportunities for high-end developments with gaming components for VIP players looking for ultra-exclusive luxury destinations.As technology advances to enhance virtual playing experience, the internet and electronic gaming sector will continue to be a bright spot for the region’s markets, whether these virtual games are played in casinos, game terminals or portable devices. The wide accessibility of such games would ensure a healthy following from the region’s large domestic population base.

How is your company responding to these trends?

LRWC is a leading player in the electronic gaming sector having been a pioneer in providing a quality gaming experience for highly popular bingo formats, as well as virtual casino game offerings, via a network of gaming venues throughout its home market. Its subsidiaries, First Cagayan and LR Data, are at the forefront of the internet gaming sector in Asia as enablers for the licensing and data hosting requirements of Asia-facing international operators and their ancillary service providers. First Cagayan and LR Data have been developing the jurisdiction with state-of-the-art technology and infrastructure, partnering with global Tier 1 telcos, and promoting the Philippines to become one of the world’s leading interactive gaming jurisdictions.

What products are you currently offering in the Philippines/Asia?

First Cagayan is the master licensor for the Cagayan Economic Zone Authority, the Philippines’ and Asia’s first offshore gaming licensing body. LR Data, an affiliate company of First Cagayan, is a bespoke, gaming-centric provider of a wide range of hosting services with robust data center operations located in the Philippines and nodes in key regional locations. Beyond licensing and hosting services, First Cagayan and LR Data strive to offer an extensive range of value-added services including legal consultation services, technical expertise, pre- and post-opening assistance. This kind of close coordination delivers a business-friendly environment leading towards a hassle-free start up for licensees and locators seeking work-life balance. The combined effort and responsibility of the Cagayan Economic Zone Authority, First Cagayan, and LR Data accord gaming operators an appropriate operating base from which they can penetrate the Asia-Pacific gaming markets and the rest of the world.

Asia Gaming Briefings | March 2017

What kind of trends do you foresee in Southeast Asia Technology will play a significant part in Asian gaming markets over the next few years, with the main areas including: Omni Channel Gaming - The omni-channel retail and interactive channels share the same central system and provide the player with a seamless gaming experience. Omni-Channel streamlines the operation of multiple channels into a single cohesive flow, simplifying operations and reducing time-to-market.

RFID Enabled Table Gaming - The new standard for table games is an integrated table games system that uses Radio Frequency Identification (RFID) technology to invisibly track chips, player wagers and game outcomes. The system uses radio signals to track every bet, every chip and every player in real time. Perfect Pay does all this while remaining indistinguishable from a traditional table game. The unique ability to bring together the accuracy, efficiency and integrity of an electronic table game and the emotion and excitement live gaming creates an unmatched operating environment and a superior player experience.

Artificial intelligence - The field of AI is a complex area of research.

AI for games takes on different forms depending on the needs of the game designed, ranging from simple sets of rules for computer-controlled entities to more advanced adaptive systems. Applying AI concepts to games is a way to increase the interaction in electronic entertainment.

AI can play multiple roles in gaming including games, surveillance, loyalty systems, video and sound.

How is your company responding to these trends?

With offices in Manila, Kuala Lumpur and Macau, our team has a wide range of knowledge in local markets. Jade prides itself in partnering with gaming industry technology leaders to offer a diversity of cuttingedge products and solutions. Jade provides products and services in all facets of the gaming industry including land-based casinos, lotteries, sports betting, e-games platforms, payment solutions, electronic Bingo.

What products are you currently offering in the Philippines/Asia?

Novomatic – Gaming machines, systems, lotteries, interactive gaming solutions, Walker digital table systems – Perfect Pay RFID enabled tables and Elite Bet, NRT – Payment redemption kiosks and solutions, Apex – Gaming machines, and ETG’s Game Vault – MIWA locks Graphic Controls – TITO paper, Base Technology – Cage equipment and Jade Service – 24/7 support services.

SUPPLIER SPECIAL REPORT 47 QUANTA TECHNOLOGY LTD

RGB

Rising mobile penetration

Growth trajectory

What kind of trends do you foresee in Southeast Asia?

We see huge potential in the region. Lottery is already well accepted by the masses and this trend will continue with expansion of the middle class population.

Currently most of the services are land based. However, as penetration of smartphones is very high, people are getting more familiar with online products and applications. For instance, mobile money and mobile payments are represented as a remittance platform and alternative payment solution to payments in brick and mortar shops. Cash in/out, money transfer, money remittance and recently, online gaming have integrated mobile payment into their businesses. We believe the lottery market among other businesses will soon find it impossible to stay out of the flourishing mobile economy in the region.With the regional expansion of the mobile payment ecosystem, and the increasing popularity of online lottery in Japan, South Korea etc., we expect there will be a spillover effect that will set off future lottery growth in the ASEAN market.

How is your company responding to these trends?

As Quanta Technology Limited, we provide solutions to both existing and new lottery operators, providing a high quality, automated and transparent online lottery platform. The Quanta platform is rooted in three core technologies: Blockchain, Smart contracts, and Random Number Generator (RNG) based on Ethereum. Equipped with this trifecta, we can tackle long existing industry issues such as lack of transparency in prize pool distribution, doubts about the randomness and security of RNG, and complaints on small winning numbers. We could transform existing lotteries into more secure, transparent and low cost operations. This disruptive innovation will benefit all people involved; players can enjoy safe and transparent games with possibly higher prize pools, operator can reduce operation costs and still run a sustainable service, regulators will have access to a more transparent system and agents will have new and scalable opportunities.We believe in the high potential of online lottery, but at the same time, we understand the important role of local brick and mortar shops. Our Quanta platform is a flexible one, meaning we could support hybrid systems involving local offline communities.

In the growing market of lottery, we are confident in becoming a partner for existing online lotteries, transforming them into a more efficient service, or for new operators to build up attractive and sustainable service. Our mission is not to replace any existing cultures but to enhance them and foster business growth.

What products are you currently offering in the Philippines/Asia?

Quanta will make its debut once it is licensed in the Isle of Man and make its way onto the global market. Asia in general and the Philippines in particular are definitely among our top of mind markets for Quanta’s unprecedented lottery protocol.

We will carefully examine each market to be locally compliant. We believe, in order to obtain long-term success, it is crucial to align with existing regulations and rules. Therefore we invest in the jurisdiction field just as much as we do in the engineering field and prefer to take a step by step approach. When you do the procedure in the right way, there are massive opportunities ahead. We are widely open to business in Asia and Philippines’ online gaming market. If you also share the same excitement as us for these innovative technologies and new opportunities, let’s catch up at at ASEAN Gaming Summit 2017.

What kind of trends do you foresee in Southeast Asia?

The growth of the gaming business in South East Asian countries has been on an upward trend in the past few years and we foresee this trend to continue in the next few years. The Philippines is expected to continue to grow with new openings and expansion in existing venues. The next potential growth market in Southeast Asia is Vietnam, where the government recently approved the opening of two new Integrated Resort Casinos, which will allow local Vietnamese to enter, albeit with certain conditions. If the government is satisfied with this trial, there is a good possibility it will allow more casinos for local Vietnamese, which certainly will have a great impact on the growth of the gaming market in Vietnam and in Southeast Asia overall. To complement this, the number of Slot Clubs in Vietnam is increasing in addition to the number of machines in the existing venues. In other parts of Indochina, mainly Cambodia and Laos, the market will certainly continue its upward trend due to new openings and expansion, such as the opening of the NAGA Casino extension. With these current developments in Southeast Asia, the road is clear for positive growth for the gaming industry in this region.

How is your company responding to these trends?

The growth in the gaming market in Southeast Asia is welcomed

by RGB as our strength lies is in this region. Being a company based in Malaysia and having regional offices in Singapore, Philippines, Cambodia, Vietnam, Laos and Macau, RGB has the edge to leverage on gaming market growth in Southeast Asia. RGB has more than 450 employees located throughout the region, comprising of our marketing and technical teams.

Our marketing team is well trained to promote gaming products produced by many world renowned manufacturers, whilst our engineering team is accredited to provide technical services for most gaming products and equipment.

What products are you currently offering in the Philippine/Asia?

With three decades of experience, RGB engineers provide complete turnkey solutions right from installation and repair through to preventive maintenance of electronic gaming machines, table utilities, gaming equipment and almost all other products required in the gaming industry. RGB is the authorized distributor of gaming products, with exclusive distributorship in certain jurisdictions, for a number of global brands.

Our partners are household names, with products of great reputation, marketability and proven performance. \RGB is a distributor for a wide range of Electronic Gaming Machines, casino products and casino equipment from manufacturers such as Scientific Games (SHFL, Bally and WMS), Aristocrat, Zitro, R.Franco, Cartamundi and SuzoHapp. RGB is your one stop gaming solutions provider.

Asia Gaming Briefings | March 2017

SUPPLIER SPECIAL REPORT 48 SAN MARCO CAPITAL PARTNERS

Foreign investor interest in SE Asia grows

SAN MARCO C APITAL P ARTNERS LLC

investment in Southeast Asia becomes more attractive to foreign investment.

We expect to see a continued increase in interest from top tier investment funds and operators.

What kind of trends do you foresee in Southeast Asia?

We believe the Southeast Asia region will continue its upward trend in the gaming market for the foreseeable future. As more jurisdictions come on line and existing jurisdictions continue to increase their regulatory framework and controls, gaming

How is your company responding to these trends?

We continue to keep a watchful eye on developing markets, including Southeast Asia, for opportunities for our clients and investment partners from an on the ground perspective, including regulatory, financial, reputational and other risks.

What products are you currently offering in the Philippines/Asia?

San Marco provides investment and financial solutions primarily to the gaming, hospitality and leisure markets worldwide.

With extensive expertise in operational, transaction and financial matters, the firm provides services in both established and emerging gaming markets including liaising and advising governmental and regulatory authorities in numerous jurisdictions worldwide.

SCIENTIFIC GAMES

Bringing Dualos to the Asian market

Scientific Games has recently introduced its new Dualos cabinet, a dual screen upright specifically designed with the Asian market in mind. It offers unique, exclusive content, customized to players in Asia, as well as gaming experiences that have already been player-proven favourites in the Asian market.

On the outside, the Dualos cabinet is an elegant combination of sleek modern design elements. The stylish surfaces with brushed metal finishes command attention, while the smooth contours, soft-touch surfaces and digital OLED buttons create a comfortable and tactile playing experience.

The 23” full high-definition widescreens,

Asia Gaming Briefings | March 2017

together with superior sound quality, are complemented by integrated lighting that is driven by the game to create an immersive and emotive playing environment. On the inside, serviceability and durability are the focus. Having received industry-wide acclaim for the Equinox internal layout, Dualos surpasses its clever design by providing easy access tomajor components and ample storage for peripheral equipment. Quality engineering of major structural components ensures reliable capability even for the most rigorous gaming enBrvironments, with easy access to money-handling components and ticket printers to minimize potential downtime. The company says the Dualos cabinet heralds the arrival of a new generation of exciting game content that will draw on the strength of a global library of themes and IP from the three leading international brands – Bally, Shuffle Master and WMS – to create one of the most dynamic game libraries in the market.

49

ISLE OF MAN. WHERE YOU CAN FIND A WORLD CLASS BASE FOR YOUR E-GAMING BUSINESS 马恩岛是一个欧洲离岸管辖区，我们理解如何并已经成功地和众多亚洲游戏公司 模型合作。许多亚洲最大的游戏公司选择在马恩岛安家。来到马恩岛您会发现这 里有极佳的声誉，先进的基础设施技术，和受严格监管的合规规范，同时您有机 会加入许多亚洲领先的知名游戏品牌。我们诚挚邀请您来马恩岛并加入他们！ Kami ay isang isla sakop sa hurisdiksyon ng Europa, na nakakaunawa at matagumpay na nakapagtrabaho sa modelong pangangalakal ng sugalan ng Asya. Ang isla ay tinaguriang tahanan ng mga kilalang kompanya ng sugalan ng Asya at ipinagmamalaki ito bilang isang lugar na may pinakamahusay na reputasyon, infrastraktura at regulasyon. Halina sa Isle of Man upang kayo ay mapasama sa mga nangunguna at hinahangaang pasugalang kompanya ng Asya. Inaanyayahan namin kayong sumali sa kanila.

Kami adalah negara pinter di Eropa yang sangat mengerti dan telah berhasil bekerja sangat sukses dengan model bisnis GAME Asia.

Kami adalah rumah bagi perusahaan-perusahaan GAME terbesar di Asia. Kami telah memiliki reputasi, infrastuktur dan regulasi yang terbaik.

Dengan mengunjungi Pulau manusia (Isle of Man), anda akan berada di dalam negara di mana banyak pemimpin GAME merk dari Asia berada. Kami mengundang anda untuk bergabung bersama mereka. 我々欧州のオフショア管轄区域は、アジア向けのゲーミングビジネスモデルについて熟 知しており、数々の成功をおさめてきました。 アジアの優れたゲーミング会社の多くがマン島でのライセンスを取得し、運営法人も設 立しています。管轄区域としての信頼性、インフラおよび規制に関しては他のどこより も評価が高く、自信をもってお勧めできます。アジア屈指のゲーミング会社を目指すの であれば、マン島を管轄区域として是非選んでください。決して後悔はさせません。

Mark Robson Head of e-Gaming, Isle of Man Tel: +44 (0) 1624 682 365 Email: mark.robson@gov.im

www.whereyoucan.com/egaming Asia Gaming Briefings | March 2017

Become a member

SPECIAL OFER 20% DISCOUNT FOR ICE 2017

$615 $1,035

$ 552 each $ 932 each

$ 492 each $ 828 each

AGB - Asia Gaming Brief | Trading as Blue Sky Venture - Reg#43675 SO | enquiries@agbrief.com 16/F China Law Building, 409 Av. da Praia Grande, Macau SAR | P.O. Box 1139 Asia Gaming Briefings | March 2017

$ 399 each $ 672 each

51

NEW CUSTOMERS. NEW TECHNOLOGIES. FOR ONLINE, LAND BASED AND LOTTERY GAMING. 4-6 July 2017

W Hotel, Barcelona 300+ C-level executives 13+ hours of networking including gala dinners, yacht trips & pool parties 80+ of the industry’s best and brightest speakers Confirmed speakers include: A

A

A

A

Conny Dorrestijn

Werner Becher

Member of the Advisory Board, Holland FinTech

CEO, Interwetten

A

A

A

A

A

Paul Richardson

A

Jan Jones Blackhurst

Group Director of Strategy and EVP Government Relations and Corporate Development, Corporate Responsibility, Caesars Rank Group Entertainment Corp

A

A

A

A

Markus Peuler

Sarah Sculpher

Chief Marketing Officer, Galaxy Entertainment Group

Chief Executive Officer, Mybet Sportsbook

Chief Marketing Officer EMEA, Caesars Entertainment UK

Kevin Clayton

A

A

Hansjörg Höltkemeier President, The European Lotteries

A

A

A

Mor Weizer

A

Andrew McIver

Chief Executive Officer, Playtech

CEO, Intertain Group Ltd

To claim an exclusive 10% discount, enter ‘QCSG’ at checkout.

Visit terrapinn.com/WGES-AsiaGamingBrief for more information.

Asia Gaming Briefings | March 2017

52

Asia Gaming Briefings | March 2017

CALENDAR OF EVENTS 53

AUGUST

MARCH IGA - IGAMING ASIA CONGRESS 27-29 March 2017 Grand Hyatt, Macau www.igamingasiacongress.com

APRIL FANTASY SPORTS EXPO ASIA 6-7 April, 2017 Macau info@eventus-international.com

IAGA INTERNATIONAL GAMING SUMMIT 30 May - 1 June 2017 JW Marriott, Essex House, New York www.theiaga.org

AUSTRALASIAN GAMING EXPO (AGE) 15-17 August, 2017 ICC, Darling Harbour, Australia www.austgamingexpo.com

IMGL SPRING CONFERENCE 10-12 May, 2017 Turnberry Isle Miami

GAMING, RACING & WAGERING AUSTRALIA 8-10 August, 2017 Sydney, Australia, Venue TBC. www.gamingdownunder.com

JUNE 7-8 June, 2017 Moscow, venue TBC www.rgweek.ru/en

MAY JAPAN GAMING CONGRESS 10 -12 May, 2017 Tokyo, venue TBC http://www.japangamingcongress.com ASIAN GAMING NETWORKING SOCIAL 12 May 2017 Manila www.agbrief.com/events G2E ASIA 16-18 May, 2017 The Venetian Macao www.g2easia.com

SEPTEMBER

RUSSIAN GAMING WEEK

JULY WORLD GAMING EXECUTIVE SUMMIT 4-6 July, 2017 W Hotel, Barcelona, Spain www.terrapinn.com/conference/ world-gaming-executive-summit/index.stm IGAMING SUPER SHOW 11-14 July, 2017 Amsterdam RAI, Netherlands www.igamingsupershow.com

ASIAN GAMING NETWORKING SOCIAL 8 September 2017 Manila www.agbrief.com/events CENTRAL & EASTERN EUROPEAN GAMING CONFERENCE & AWARDS 19-20 September, 2017 Budapest City, Hungary, Venue TBC www.ceegc.eu GLOBAL GAMING EXPO (G2E) 3-5 October, 2017 Sands Expo Center, Las Vegas, USA www.globalgamingexpo.com

OCTOBER

ASIA GAMING AWARDS 16 May, 2017 The Venetian Macao www.asiagamingawards.com

EUROPEAN IGAMING EXPO (EIG) 30 Oct - 1 Nov, 2017 Arena Berlin, Germany www.eigexpo.com

Become a member EXCLUSIVE ACCESS TO AGB INTELLIGENCE BE THE FIRST TO RECEIVE OUR DAILY BRIEFS PRIORITY REGISTRATION FOR OUR EVENTS Asia Gaming Briefings | March 2017

REGISTER NOW AT AGBRIEF.COM

FINAL WORD 54

Leadership challenges .Leaders from the Association of Southeast Asian Nations will convene in Manila in April for the first meeting under the chair of Philippine President Rodrigo Duterte and for the first time under the new administration of President Donald Trump.

Sharon Singleton

L

eaders from the Association of Southeast Asian Nations will convene in Manila in April for the first meeting under the chair of Philippine President Rodrigo Duterte and for the first time under the new administration of President Donald Trump.

The summit is likely to throw the spotlight on a radically changed global political landscape and on shifting geo ties between nations. Accurately assessing political risks and opportunities arising from the new world order is likely to present a key challenge for operators for the next few years.

The Philippines is a case in point. When mercurial strongman Duterte took the reins in June last year, Manila promptly fell out with the U.S., one of its closest allies, after former President Barack Obama criticized a bloody crackdown on drug dealers.

Duterte instead turned to Beijing, resulting in a warming of often frosty ties between the two nations.

The result has been a surge in tourism from mainland China to the Philippines in 2016, with arrivals from that country rising more than 37 percent to become the third biggest source market.

Tourism officials are expecting another strong year, following a tourism memorandum of understanding signed last October.

The increase in arrivals appears to be feeding through to the bottom line of operators in Entertainment City, which have all reported robust revenue in their latest financial periods. The Philippines was once again one of the top performers for gross gaming revenue in 2016.

On the flip side, Duterte’s crackdown on online gambling and his unpredictability has thrown the Philippines’ thriving igaming industry into confusion.

He first sowed the seeds of panic in December announcing he would shut down the industry as it had no positive impact on the economy.

He then had a seeming about face, saying he

Asia Gaming Briefings | March 2017

had only been referring to unlicensed operators who weren’t paying their taxes. His administration subsequently gave land-based regulator Pagcor the green light to issue 35 licenses to iGaming businesses through the Philippine Offshore Gaming Operator (POGO) program.

The move has led to consternation as it appears to have put Pagcor in direct competition with the existing online licensing authority First Cagayan.

How the two bodies will work side by side remains to be seen.

On the land-based side, so far Duterte’s administration has not created too many negative waves. The Philippines House of Representatives has apparently moved closer to including casinos as part of its Anti-Money Laundering Act (AMLA), closing a huge loophole that lead to a major scandal last year.

Operators say moving to strengthen regulation will improve the long-term health of the industry.

Regulators have also shut two casinos operating in the Clark Freeport Zone for alleged irregularities. Those included the Fontana Casino of gambling tycoon Jack Lam, who was forced to flee the Philippines after Duterte issued an arrest warrant.

While the industry may praise tougher regulation, it must be seen as a fair and level playing field.

Whether the allegations against Lam have any merit or not, Duterte’s aggressive way of going after his goals leaves the impression his crusades are personal. Last year, he threatened to destroy oligarchs, subsequently forcing the removal of PhilWeb chairman Roberto Ongpin and all but killing the egaming cafe business.

It’s a shoot from the hip style that many businesses in the U.S. are learning to contend with since Trump came to power. Manila has now mended ties with Washington, with Duterte the first world leader to speak to the billionaire businessman after his election.

55

Asia Gaming Briefings | March 2017