Duterte outreach a factor
Melco Crown Philippines, a subsidiary of Asian casino operator Melco Resorts & Entertainment, is now officially the world’s best casino stock. According to a report in Bloomberg News, since 2015 the stock saw a return eight times higher than a Bloomberg Intelligence index of global casino stocks. It posted the highest gains among all casino operators with a market value of $500 million.
Perhaps the most significant factor in the 125 percent spike in share values is an influx of Chinese tourists to Manila, the news outlet reports. Relations between the Philippines and Beijing have warmed thanks to Philippine President Rodrigo Duterte’s ongoing outreach to the mainland government. The after-effects of Chinese President Xi Jinping’s anti-corruption campaign in Macau has also played a part, the report indicates.
Moreover, high rollers can still gamble by proxy at Melco’s City of Dreams Manila and elsewhere in the Philippines. The practice of phone betting has been outlawed in Macau.
“Our successful investment in Manila reinforces our confidence in identifying and investing in new markets,” said Melco Resorts Chairman Lawrence Ho in an e-mail to Bloomberg News.
The Macau Daily Times reports that Melco stock has been buoyed by “Duterte’s China love.”Among Philippine casinos, “City of Dreams Manila has the strongest Macau connection, so the expectation is at some point its gaming revenue will grow faster and become the biggest in the industry,” said Noel Reyes, who helps manage $1.2 billion as chief investment officer at Security Bank Corp. in Manila. Melco Crown Philippines “is getting revalued on prospects it will soon become profitable because of the renewal of ties between Beijing and Manila.”
Chinese tourism to the Philippines was up 25 percent in the first two months of 2017, accounting for about 14 percent of total visits, government data shows. China overtook Japan as the Philippines’ third-biggest source of tourists last year. And gross gaming revenues in the country rose 20 percent in the first nine months of 2016 year-on-year, the Times reported.
“We were seeing signs of a recovery based on the inflow of tourists and growth in industry gaming revenue,” said Frederico Ocampo, BDO Unibank’s chief investment officer. “There’s more room for stock appreciation once investors realize that prospects have changed.”
Meanwhile, the Philippines embassy in China saw a 200 percent increase in visa applications from Chinese tourists and businessmen looking to visit the Philippines, the Inquirer reports.
Philippine Ambassador to China Jose Santiago Sta. Romana said Duterte’s olive branch was a pivotal factor, and will serve to improve tourism in the country. “We were out of the mainstream. The Chinese were touring Southeast Asia but not the Philippines during the period of our strained relations because the Chinese media coverage of the Philippines then was quite negative. Recently, the coverage of the Chinese media has been quite positive,” he said.
“China, right now, constitutes a big demand of visas because of the boom in tourism and in business travel,” he said. “We will hit one million arrivals this year.” According to Romana, more than 675,600 arrivals were recorded in the year 2016, up 36.7 percent year-on-year.
But MGM Senior Vice-President for Global Development Ed Bowers said the U.S. casino company has no interest in the country due to intensifying competition. “We looked at Philippines a couple of years ago, and we decided not to go there. I’d say probably partly to do with the market, certainly about the ability of the market to grow,” he said at G2E Asia. “There’s a country risk element in doing business in the Philippines and it’s really high.”
In related news, the Sydney Morning Herald reports that Australian casino magnate James Packer may have been left out of the Melco bonanza, having withdrawn from the region after the arrests of 18 employees in China last year. That fiasco, which remains unresolved, “sent Packer’s Crown into full retreat from the region, which is just starting to recover from China’s anti-corruption drive,” the Herald reported.
“It now looks like the only market that Chinese high rollers are avoiding is Australia,” the publication added. “Which is the only market Crown has left.
