Bloomberry to see mixed impact from land purchase: MS

Bloomberry Resorts would see its debt levels rise and a reduction in return on invested capital in the short term if it buys the land on which its Solaire Resort & Casino is based, though longer term it may improve valuations, according to Morgan Stanley.

Market regulator, the Philippine Amusement & Gaming Corp., earlier this week said it planned to auction off the land, setting a minimum bid of P37 billion ( $740 million). Offers are due by Nov. 27.

If Bloomberry decides to buy at the minimum price, the company’s net debt will rise by P37 billion from P8.3 billion at the end of the Q3. The purchase would cut return on invested capital to 15 percent from an estimated 24 percent this year and may also eat into the expected dividend level for next year, the firm said in a research note.

If half of the purchase is funded through debt, its interest expenses will rise by P900 million cutting net income and free cash flow to equity.

“The saving of lease payment of PP250mn per annum (till July 2033), which is 2 percent of 2017e EBITDA, is not material in our view,” Morgan Stanley says.

However, on the flip side, if the company continues to lease, the annual payments may end up increasing by as much as 9 times, reducing 2018 EBITDA estimates by 13 percent.

Morgan Stanley also notes that given rising land values in the Philippines, owning the land may actually improve the company’s market valuation. Land in the country has risen by 6 to 7 times in the past five years from P28,000 per sqm to P200,000. It also points out that Boyd Gaming in the U.S., which owns the land on which its casinos are based, trades at a higher valuation than Penn National Gaming, which spun off its real estate assets.

Casinos in Macau and Singapore do not own the land on which their IRs are based, while Melco Resorts also leases land in Manila. Resorts World Manila and Okada Manila own the land.

More news from this jurisdiction

PhilippinesWednesday, Mar 21, 2018

Galaxy Entertainment Group said it plans to build a low-rise, eco-friendly resort on Boracay, which will be its first project outside of Macau.

PhilippinesTuesday, Mar 20, 2018

Malaysia’s Genting Group is planning an integrated resort on Boracay island at the Savoy Hotel, Philippine Amusement and Gaming Corp Chair Andrea Domingo told reporters at the ASEAN Gaming Summit.

PhilippinesTuesday, Mar 20, 2018

The Philippines is in a strong position to capture a growing share of the premium mass market to help diversify its tourism base, according to Bloomberg Intelligence.

PhilippinesMonday, Mar 19, 2018

Leisure & Resorts World Corp (LRWC) said one of its units has bought a 23-hectare site on Boracay island to develop a $500 million integrated resort with Galaxy Entertainment.

PhilippinesSunday, Mar 18, 2018

Galaxy Entertainment Group’s proposed $500 million casino in Boracay will be proceeding despite an impending closure of the island for up to one year.

PhilippinesThursday, Mar 15, 2018

Gaming Laboratories International has become the first independent accredited gaming test laboratory to successfully complete and issue IP Blocking Certificates for Philippine Offshore Gaming Operator (POGO) licensees.

PhilippinesWednesday, Mar 14, 2018

Steve Trowbridge, CEO of Rhetroactive, will be speaking about the role of non-gaming amenities at the ASEAN Gaming Conference, taking place in Manila.