Morgan Stanley: Philippines Asking Price for State-Owned Casinos Too Pricey

Investment bank Morgan Stanley said in an advisory note this week that the Philippines government seeking nearly $1.5 billion for its state-owned land-based casinos is likely a bit rich.

Morgan Stanley Philippines casinos PAGCOR
Casino Filipino in Angeles City is owned and operated by the Philippines Amusement and Gaming Corporation. The government-controlled casinos are up for sale, but the $1.47 billion asking price might be too rich to entice buyers, analysts at Morgan Stanley said. (Image: Foursquare)

The Philippines is home to both commercial and government-run casinos. The Southeast Asia island country owns and operates 41 casinos and satellite gaming venues under the Casino Filipino brand.

The Philippines government has, for several years, been mulling divesting its gaming operations. That would allow PAGCOR, the Philippines Amusement and Gaming Corporation, to transition from a regulatory-operator role to a regulatory-only capacity.

The sale would also provide the state government with an immediate influx of cash. But just how much money the more than three-dozen gaming properties can generate is debatable.

Last week, PAGCOR Chair Alejandro Tengco said a reasonable price would be around 80 billion pesos (US$1.47 billion). Tengco, who was appointed to the position last August, two months after President Bongbong Marcos took office, said it’s his hope that PAGCOR can sell off its casino assets during his term that runs through 2028.

Steep Asking Price

Providing coverage on the Philippines gaming industry, Morgan Stanley analysts Praveen Choudhary, Dan Chee, Jeffrey Mak, and Gareth Leung reached the consensus opinion that the $1.47 billion the Philippines is asking for its casinos is likely too high.

Buying interest could be low [at that price],” the analysts said.

PAGCOR casinos generated 2019 gross gaming revenue (GGR) of PHP37 billion (US$680 million). The government gaming locations won just PHP15.8 billion (US$290 million) last year, as COVID-19 hurt business throughout much of the year.

Optimism, however, for the Filipino gaming industry is high this year, and looking forward. That’s predominantly because of China’s recent decision to force VIP junket groups that had catered to mainland high rollers to stop transporting Chinese gamblers to Macau.

Many of those junket operators are expected to target the Philippines, specifically Manila’s Entertainment City, where Melco Resorts’ City of Dreams, Bloomberry Resorts’ Solaire, and Tiger Resort’s Okada Manila are located.

Bloomberry, a Philippines-based gaming operator with the financial means to acquire the PAGCOR casinos, was previously viewed as a front-runner for the government divesture. But Bloomberry appears focused on expanding its Filipino footprint with its own developments, including Solaire North in Quezon City.

2023 GGR Forecast

Though Morgan Stanley analysts don’t believe PAGCOR’s $1.47 billion asking price for its Casino Filipino properties will garner much interest from potential buyers, the government gaming regulator-operator says GGR this year will render the opportunity much more attractive.

PAGCOR published its 2023 gaming outlook on Wednesday. The agency projects full-year GGR will reach PHP244.8 billion (US$4.5 billion), $1.2 billion more than the $3.3 billion the commercial and government-run casinos won in 2022.

Since the lockdowns were eased in the country late last year and gaming venues reopened, customer confidence slowly returned and the attendance in our owned casinos slowly improved,” said Tengco. “Our licensed casinos likewise recorded a major revenue growth.”

Tengco says the Philippines and PAGCOR will promote regulatory initiatives favorable to businesses in hopes of strengthening nation-building efforts.

“We will ensure that our plans and programs for 2023 will be generally beneficial to our industries,” Tengco concluded.

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