PHILIPPINES

Philippines appeases China on POGOs

Philippine President Rodrigo Duterte claims to have China’s backing for its handling of its online gaming industry, potentially providing some clarity to the market after a year of uncertainty.

2019 was undoubtedly a dark year for igaming in Asia after Beijing finally decided it would no longer tolerate online gaming firms targeting its nationals. After years of turning a blind eye, tensions rose to a boiling point amidst reports of kidnapping and loan sharks, not to mention tax avoidance and illegal workers.

In August, the Chinese Embassy in Manila put out a statement urging cooperation to stamp out online gaming. Cambodia immediately obeyed, banning the industry outright from the beginning of this year, though the Philippines has resisted, saying instead it would improve regulation.

In a recent interview with local media, Duterte said he had won the Chinese government’s understanding on Manila’s handling of Philippine Offshore Gaming Operators (POGO).

“If there is a need to deport, arrest, then they’re keeping their hands away from all these things. [We] have the prerogative to do what [we] want to enforce the law. In fairness to Chinese government, they understand,” he said.

He noted that this message had been communicated to him by Chinese Ambassador to the Philippines Huang Xilian.

However, Duterte also warned that the current size of the POGO industry is about as much as the nation can handle: “If you add more to this number presently operating, you will not be able to police them all. So you have to set a number for that. It cannot be in every town and city about so many POGO games going on.”

POGOs paid PHP175 million ($3.4 million) in taxes in their first year of operations. That rose to more than PHP579 million in 2018, with the figure jumping to PHP1.63 billion in 2019 to August alone.

The government has been unwilling to lose such a lucrative source of revenue, which is dedicated to nation-building programs. Instead, the Philippine Gaming and Amusement Corp. has imposed a moratorium on new licenses while it improves existing regulation.

Much of its efforts have centered on ensuring the POGOs pay the correct taxes and its workers are properly documented. There are thought to be hundreds of thousands of Chinese working for online companies having entered the country on a tourist visa.

The Department of Justice has announced that visas-upon-arrivals (VUAs) for Chinese tourists would now be limited to 30 days from the previous three months. The previous rules of the VUA allowed the tourist to stay for 3 months, extendible for another 3 months.

The new visa will not be able to be converted into another type of visa, such as a work visa or resident visa

When it comes to tax collection, the Department of Finance sent out letters to some 130 firms last year ordering them to pay up. From Jan. to August last year, it collected PHP1.4 billion, a 242 percent increase on the prior year.

However, authorities said the pace of collection was still slow and Duterte weighed in in December, threatening to “punch” delinquent firms if they didn’t settle their accounts.

Despite the moratorium on further expansion, real estate companies say they still expect the online gaming sector to drive growth in office rentals in Metro Manila this year, albeit at a slower pace than in 2019.

Meanwhile, in land-based gaming, the Philippines is once again expected to be one of the best-performing markets in Asia in 2020.

If you add more to this number presently operating, you will not be able to police them all.

According to Fitch Ratings gross gambling revenue is likely to grow by high single digits, driven by the ongoingramp up at Okada Manila and expansion at Resorts World Manila.

The growth is being underpinned by a solid domestic economy.

“We do not expect Okada Manila’s expansion to adversely affect competitors’ revenue. However, we expect competition from Macau and other APAC markets to constrain growth going forward, in particular in the VIP segment, which accounts for around 32 percent of the private casino GGR (first-half 2019),” it said.

GGR from casinos in the Philippines hit more than $3 billion in Q3 of last year.

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 hotel room count for the group’s three hotels (Maxims Hotel, Remington Hotel, and Marriott Hotel Manila) remains at 1,226. The property is currently in the third phase of its expansion, which will add approximately 940 rooms. It will also include new gaming and retail spaces.

The company on Oct. 21 delisted its shares from the Philippine Stock Exchange, reducing its need to communicate its plans and financial results to the wider market. Announcing its decision, Travellers said delisting would enable the company to meet “evolving market demands and rapidly-changing customer needs without compromising its business strategies to competition”.

Bloomberry Resorts

Bloomberry Resorts’ Solaire was the first IR to open in Entertainment City and is a 16-hectare integrated resort. The Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including 6,000 square meters of exclusive VIP gaming areas), with about 1,400 slot machines, 295 gaming tables and 88 electronic table games. The Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines.

Morgan Stanley says Bloomberry gained share in both VIP and mass over the first half of last year, remaining as the GGR market share leader in 2019.

Key concerns, however, include increasing supply from Okada and Resorts World Manila, and the lack of capacity until 2023 with the opening of Solaire North, the firm noted.

For Q3, the company posted a consolidated net revenue of P13.3 billion, up 49 percent. Consolidated EBITDA hit record levels at P6.4 billion, driven by higher gaming revenues and continued cost control in the Philippines and South Korea, while consolidated net profit increased 245 percent to P3.9 billion.

Tiger Resort Leisure and Entertainment

Okada Manila, owned by Japan’s Universal Entertainment, is the largest resort in Entertainment City and the last to enter the market, with a soft opening in 2016. The property spans 44 hectares and at the completion of Phase One, Okada will have 994 hotel rooms and operate 500 tables and about 3,000 slots. Its centrepiece is the world’s largest coloured fountain, as well as a giant inner city beach complex, known as “Cove Manila.”

The resort is now ramping up strongly. For December, the group announced gross gambling revenue of PHP4.6 billion, which was almost double that of the prior year. VIP revenue more than doubled, while mass market revenue jumped from PHP666 million to PHP964 million the prior year.

Parent company Universal Entertainment said its priority for the resort is to add more entertainment amenities and attractions. However, it says it’s also in talks for joint ventures with partners to develop the real estate adjacent to the resort. This real estate development will be designed to strengthen the profitability of the IR, the company said.

City of Dreams

The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Crown Entertainment’s local unit. 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 and a 4,612.44 square meters family entertainment center in collaboration with Dreamworks Animation.

The group’s recent results have shown the impact of greater competition in the Philippines. In Q3, total revenue fell almost 8 percent to $130.5 million, while EBITDA was down 9.6 percent.

Rolling chip volume fell to $2.44 billion from $2.98 billion, while its mass table drop fell to $202.1 million from $204.9 million.

SEC probes Suncity buy in

The Securities and Exchange Commission (SEC) is investigating whether Suntrust Home Developers, co-developer of Westside City Resorts World, should have made a tender offer to public investors, during its acquisition by Suncity Group.

The company was recently acquired by Suncity Group Holdings, as a way for the junket operator to make its foray into the Philippines’ gaming market – with a 51 percent share in the company.

According to SEC Commission Secretary Arman Pan, the commission is looking into whether Suncity needed to conduct a tender offer for the minority shareholders at the time of acquisition, or whether “there was no need for a tender offer because Suncity Group, through its wholly-owned subsidiary Fortune Noble Ltd., supposedly acquired control of Suntrust in the open market.”

Under the tender offer rules, any person or group intending to acquire 35 percent of outstanding voting shares to gain control of the board in a public company must disclose such intention and contemporaneously make a tender offer for the percentage sought to all holders of such securities within such period.

Philweb’s Valdes moves to Alphaland

Philweb Corporation president Dennis Valdes is stepping down from his role as president, and moving to Alphaland Corporation, a real estate firm chaired by Robert Ongpin.

In his place, the company has elected Brian K. Ng to the post of president, effective Feb 1, 2020. Ng is currently senior vice president for Gaming, a post he has held since joining the company in January 2011. Valdés, who is moving to Alphaland Corporation, said “We are very pleased with the election of Brian to the post of president.

His capable handling of our gaming operations over the past years gives us great confidence that he will bring fresh ideas and renewed energy to the task of propelling PhilWeb to new heights, especially as we continue our dual push in e-casino and e-bingo.”