Philipppine’s Gaming Industry Revival Boosts Melco Crown Casino

Due to an increase in junket and VIP demand, the casino industry’s gross gaming revenue (GGR) in the Philippines is witnessing strong growth according to brokerage firm Nomura.

In a statement Daniel Adam Brian H. and Harry C. Curtis, analysts with Nomura said,

Despite political pressure on Chinese nationals and increased violence related to the Philippine government’s crackdown on drug traffickers, we estimate market revenues grew in excess of 40 percent in fourth quarter 2016

According to the analysts, the overall demand in the market might exceed the supply in the capital city of Manila. In the third quarter of 2016, casinos in Manila brought in a combined GGR of $454.9 million, which was an increase of 19.8 percent over the same period last year.

City of Dreams Manila

There are four casinos operational in the city: Resorts World Manila, operated by Travellers International Hotel Group Inc, Melco Crown’s City of Dreams Manila, Solaire Resort and Casino, run by Bloomberry Resorts Corp and the newly-opened Okada Manila, owned by Tiger Resort, Leisure and Entertainment Inc.

Assessing the operations of Melco Crown’s property in particular, Nomura said that the overall positive performance of the market was enabling the City of Dreams to see a strong revival and was also lowering the risk of poor revenue growth for it in the current year.

According to the brokerage firm, the property EBITDA [earnings before interest, taxation, depreciation and amortization] for City of Dreams Manila for the fourth quarter would be around $10 million, more than analysts’ expectation of $32 million.

Nomura’s analysts additionally pointed out that the unexpected revival of VIP gaming segment enabled Melco Crown to increase its revenue by over three times on a year-on-year basis. They however added that initial VIP base was relatively low at $27.3 million in fourth quarter of 2015. The City of Dreams Manila saw an adjusted EBIDTA of $45 million in the third quarter of 2016 versus the $24.4 million recorded in the same period of 2015. Increased casino revenue was the primary reason for the improved EBITDA according to Melco Crown.

Nomura analysts are optimistic with respect to the growth prospectus of the casino industry in the Philippines. They have however cautioned about competitive pressure from the opening of the $2-billion Okada Manila casino resort, which had a soft launch in December. It is scheduled to have a grand opening in February and could be a game changer for the region.

Adrian Sterne

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