PHILIPPINES

Corona crisis restarts talk of PAGCOR casino sale

The Covid-19 crisis has rekindled debate over the potential privatisation of the Philippine Amusement and Gaming Corp (PAGCOR) casinos to raise funds to fight the pandemic.

The regulator has so far resisted calls to sell off the properties, arguing that they are profit making and already generating funds for the government. However, concern has been raised on multiple occasions about PAGCOR’s dual role as regulator and casino operator.

The latest call for a sell off came from Senate Minority Leader Franklin Drilon, who has asked economic managers to review state assets that may be sold off immediately to generate funds. Among those mentioned were PAGCOR’s casinos and the Philippine Charity Sweepstakes Office (PCSO).

According to Jade Entertainment CEO Joe Pisano, any such sale would likely attract considerable interest amongst both local and international investors.

“As PAGCOR operates under a congressional franchise, I expect that the sale of assets would require congressional approval,” he notes. “As PAGCOR doesn’t own the properties I would imagine that the sale would be for Operational and Leasehold rights.”

PAGCOR has nine branch casinos operating collectively under the Casino Filipino brand and a further 32 satellite casinos spread in popular tourism destinations across the country. Industry experts say many of the properties are outdated and will need investment to bring them up to international standards.

However, they are seen as attractive assets, giving an entry point into what has been one of the best-performing markets in Asia over the past few years.

In 2019, Philippine gross gambling revenue rose just over 15 percent to PHP248.4 billion. However, revenue from PAGCOR’s casinos came in at PHP36.9 billion, underperforming the market with a gain of just 2.8 percent.

The casinos operated a total of 472 tables and 9,581 electronic table games as of the end of last year.

The Philippines is one of the only countries in the Asian region where locals are allowed to gamble, providing an underpinning of domestic support. Its economy has been Asia’s star performer over the past few years and tourism numbers had been rising.

If the privatisation gets the go-ahead, advisers will have the daunting task of how to price the assets.

“Prior to the pandemic, it would have been a fairly easy exercise to place a valuation on each gaming property,” said Andrew Klebanow of Klebanow Consulting. “Based on historical operating performance for each property and future demographic trends within each market, determining a fair price for each property would reduction in gaming capacity with the elimination have been straight-forward. There would also of chairs at gaming tables and slot machines have been a number of casino operators, both being the simplest measures. Casino operators domestic and international, that would have been may also have to adhere to government mandates interested in acquiring some of those assets.”

The challenge today is that it is now very difficult to determine gaming revenues once the casinos re-open.

“The challenge today is that it is now very any given time, much like grocery stores limit difficult to determine gaming revenues once the number of patrons that can be in the store the casinos re-open. Without a predictable revenue forecasting model, it will be impossible to accurately determine future cash flows and the amount of debt that each property could support if they were sold," Klebanow says.

Some of the questions that will need to be answered include how fast revenues are able to return back to 2019 levels. Although the Philippines does have support from the local market, many small business owners will have taken a major knock from the crisis-imposed lockdowns.

Gross domestic product had already been to receive the best price possible for its casino slowing, coming in at six percent in 2019, assets. And while there are players with the the lowest level in eight years. This year, the economy may even tip into recession, according toe government forecasts.

It’s also highly likely once the properties do reopen that some kind of social distancing measures will be put in place.

Klebanow says these will probably include a reduction in gaming capacity with the elimination of chairs at gaming tables and slot machines being the simplest measures. Casino operators may also have to adhere to government mandates as to how many patrons can be in a casino at any given time, much like grocery stores limit the number of patrons that can be in a store at any given moment. Patrons may be forced to wait in line outside and wait their turn for admission.

Casinos may also have to come up with some sort of reservation system for their players, much like restaurants take reservations today.

"These kinds of restrictions will certainly impact gaming revenues. The questions are, what will be the scope of those restrictions and how long will the restrictions last before revenues recover to pre-pandemic levels?"

PAGCOR will be under maximum pressure to receive the best price possible for its casino assets. And while there are players with the available capital to make a bid, they are unlikely to agree to pay top ollar until there is a greater clarity over future gaming revenues.

"Given these variables, it is unlikely that the seller (PAGCOR) and potential buyers will be able to agree on fair prices for those assets at this time," Klebanow says.

U.S. court finds in favor of Bloomberry

Bloomberry Resorts said that a court in the United States dismissed an attempt by Bangladesh’s central bank to reclaim funds that were stolen from its accounts and subsequently laundered through Philippine banks and the Solaire Resort & Casino.

The United States District Court, Southern District of New York granted the defendants’ joint motion to dismiss for failure to state a Racketeer Influenced and Corrupt Organizations Act (RICO) claim or RICO conspiracy claim, the company said in a statement to the Philippine Stock Exchange.

The court declined to exercise its supplemental jurisdiction over the remaining state law claims.

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. Parent company, Universal Entertainment said revenue at Okada Manila fell by more than 54 percent year-on-year in March as a result of the March 15 suspension of business.

Total GGR came in at more than PHP1.5 billion (US$30 million). Adjusted EBITDA was recorded at a PHP248 million loss for the month of March.

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.

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.

In April, the company said in future Bloomberry will consider a broader universe of possible investment opportunities, which include gaming, hospitality, and other non-gaming assets. It said that it has no current plans. Bloomberry is currently constructing Solaire Noth which will be its second Integrated Resort in the Philippines. Solaire Noth is located in the populous and highly urbanized Quezon City.

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-meter family entertainment center in collaboration with Dreamworks Animation. In 2019, City of Dreams Manila had an average of approximately 2,265 gaming machines and 311 gaming tables. The company has warned in recent reporting periods that it is beginning to feel the impact of increased competition in the Philippines.

Suncity gets investor goahead for Manila investment

Suncity Group has won shareholder approval to invest in three parcels of land located at Manila Bayshore Integrated City. Suncity has approval to pay, through Suntrust Home Developers, an initial US$200 million as provided under a co-development and lease agreement with Westside City Resorts World and Travellers International Hotel Group.

The shareholders also approved Suntrust’s lease agreement with Westside and Travellers as lessor of the parcels of land.

The agreement comes as part of moves by Suncity to operate a casino in the Philippines, which began in October last year when Suncity acquired a controlling stake in SunTrust for the rights to build a five-star hotel with at least four hundred rooms and a casino with four hundred gaming tables and 1,200 slot machines for both the mass and VIP markets.