PHL gaming industry to benefit from Asia-Pacific casino operators' expansion

The Philippine gaming industry is seen to grow "higher than gross domestic product (GDP) levels" in 2013, benefiting from the expansion of Asia-Pacific casino operators, Standard & Poor’s Ratings Services (S&P) said.

However, these developments face risks like intensified competition and earnings volatility.

In its latest report published Thursday, S&P said that casino operators across the region are looking for new investment opportunities to expand their operations and diversify in emerging economies.

“Casino operators have significant cash on hand and are searching for new opportunities to expand their gaming operations. Major new investment is underway in Macau and the Philippines, and some operators have shown interest in investing in potential new gaming markets, including Japan and Taiwan,” S&P said.

“Operators are expected to make multi-billion dollar investments in several new integrated casino resort projects over the next few years, mainly in Macau and the Philippines,” it added.

With continued interest in the country, S&P expects revenues from the local gaming industry to grow higher than its projected gross domestic product (GDP) forecast.

“We expect gross gaming revenue in the Philippines to increase well above annual GDP rates; but much depends on the opening and success of new resorts,” it said.

On May 14, S&P raised the Philippines' base case growth forecast to 6.5 percent this year, 6.3 percent in 2014, and 6 percent in 2015. On March 7, S&P pegged the Philippines' GDP growth scenario at 5.9 percent this year, 5.7 percent in 2014 and 5.4 percent in 2015.

The ratings agency noted that Overseas Filipino worker (OFW) remittances, which have spurred economic growth in the Philippines last year, will contribute to the growth of the industry.

“In 2012, OFW remittances rose 6.3 percent to a record $21.4 billion, leading to higher disposable income—some of which we expect to filter through to the gaming industry,” S&P said.

With all these developments, the Philippine gaming industry will also face some oversupply risks resulting in intensified competition and volatility in the region.

“Although Manila is well located in the center of Asia-Pacific to attract overseas gamblers, significant new gaming and entertainment supply will be launched at Pagcor (Philippine Amusement Gaming Corp.) Entertainment City over the next few years. We expect this new supply could intensify competition in the region, particularly for the 'VIP' (or high-roller) market, which is yet to be tested in the Philippines,” S&P said.

“We also expect increased earnings volatility as the market adjusts to the rapid increase in new supply, similar to the earnings volatility during the ramp-up of the Singapore market,” it added.

The 100-hectare Entertainment City going up on the reclamation area of Manila Bay will house the integrated resorts of SM Group's Belle Corp., Universal Entertainment, Travellers, and port magnate Enrique Razon's Bloomberry Resorts Corp., which opened hotel-casino complex Solaire on March 16.

The government expects Entertainment City to have the capacity to deliver up to $10 billion annually in gaming revenues, generate over 400,000 direct and indirect jobs, and attract 10 million tourists a year at full development. — Danessa O. Rivera/BM, GMA News