Industry EBIDA (Earnings Before Interest, Depreciation and Amortization) for Philippines casinos is tipped to have grown by 8% quarter-on-quarter and 27% year-on-year in 2Q17, led by another strong performance by Bloomberry and Melco Philippines.
In a weekend report on the Philippines’ gaming scene, Morgan Stanley analysts Alex Poon and Praveen Choudhary predict Bloomberry EBIDA to grow 19% quarter-on-quarter and 27% year-on-year, with Melco Philippines to rise 18% quarter-on-quarter and 93% year-on-year.
With Bloomberry’s EV/EBIDA in 2018 expected to be 6.5x and Melco Philippines 6x, that makes them considerably more attractive than any of Macau’s Big 6, as well as major operators in Singapore, Korea and Australia.
“Stock prices of Bloomberry and Melco have been flattish in the last two months after a 60 to 138% rally since the beginning of the year, despite attractive valuations of 6x 2018e EV/EBITDA,” Morgan Stanley said, pointing to the recent opening of Okada Manila and the risk of tighter regulatory restrictions following the 2 June attack at Resorts World Manila as the main reasons.
However, a slow start for Okada – which it estimates to hold only 6% market share – and the re-opening of RWM with improved security measures will help, particularly with fears of a casino entry fee being introduced now dissipating.
The 2Q17 performance of Bloomberry – operator of Solaire Resort & Casino in Manila’s Entertainment City – and Melco Philippines, which runs City of Dreams Manila, will be partially offset by Travellers International Hotel Group which is expected to decline by 31% quarter-on-quarter and 28% year-on-year due to the events at its flagship RWM property.
However, the long-term prospects for all Philippines operators are positive.
“Sequential growth of 12% is the fastest since 3Q16 mainly driven by proxy betting attracting foreign VIP revenues (+27% quarter-on-quarter and +23% year-on-year), while mass grew by low single digit sequentially and by 29% year-on-year,” Morgan Stanley said.
“Visitor arrivals in the Philippines grew by +13% year-on-year year to April.”
With RWM’s gaming operations now underway again after having its gaming license suspended for three weeks in June, Morgan Stanley predicts July GGR to rebound by between 5 and 10%.
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