House Doesn't Always Win as Philippine Casino Bet on China Sours

Manila Bulletin, June 24, 2015 | Go to article overview

House Doesn't Always Win as Philippine Casino Bet on China Sours


By Ian Sayson

In February 2014, Melco Crown Entertainment Ltd. co-Chairman James Packer described the construction of the City of Dreams casino in Manila as a "bet on China." Sixteen months on, the gamble hasn't paid off.

With a government crackdown on corruption in China scaring customers away from Macau, where gaming revenue has fallen year- on-year for four straight quarters, the opportunity appeared to be there for other Asian gambling hubs to cash in on punters seeking less-scrutinized destinations.

Instead, the anticipated flood of high-rollers from China to Manila's three casino resorts has so far failed to materialize, and the market value of operators like Melco Crown Philippines Resorts Corp. and Bloomberry Resorts Corp. has been shredded as investors fled, making Philippine casino stocks among the world's worst performers this year. Profits will tumble 56 percent across the industry in 2016, JPMorgan Chase & Co. forecast this week.

"The chain reaction from Macau hit everyone," said Noel Reyes, chief investment officer at Security Bank Corp., who manages the best-performing Philippine equity fund in the past year. "Expectations VIP players will come in large numbers didn't happen. The stocks have fallen quite significantly but not everyone is rushing back in, and there's no clear light at the end of the tunnel."

Casino shares have crashed even as the benchmark Philippine Stock Exchange Index has climbed 4.4 percent this year, peaking at an all-time high in April amid official forecasts for two straight years of 8 percent economic growth.

China Arrivals

Shares of Bloomberry, which operates Solaire, have lost 27 percent this year, and Resorts World Manila operator Travellers International Hotel Group Inc. has slumped 35 percent. Melco Crown Philippines tumbled 56 percent as earnings disappointed investors, outpacing even the 36 percent loss at Wynn Macau Ltd., the Chinese territory's worst-performing casino stock.

Bloomberry added 0.1 percent to 9.02 pesos at 9:54 a.m. in Manila, while Travellers was unchanged and Melco climbed 3.2 percent to 6.20 pesos, poised for its first gain in eight days after slumping to the lowest level since December 2012 on Tuesday.

JPMorgan Chase & Co. downgraded Melco's stock to underweight from overweight in a report dated June 21, and cut its 12-month price target by 63 percent to 5.80 pesos.

China Arrivals

Arrivals to the Philippines from China, the country's fourth-biggest tourist market, fell by about 33 percent to 93,043 in the first quarter as the Chinese government stepped up its anti-corruption drive. …

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