Maybank, in its latest investment memo, reiterates its positive expectations for Solaire Resort North despite Bloomberry’s 1Q24 core net income decline.
Analyst Raffy Mendoza notes that Bloomberry’s 1Q24 core net income of PHP2.9 billion ($50 million) fell 3 percent year-on-year, lagging the group’s forecast of a 26-29 percent contribution to the full-year 2024 estimate.
The lower-than-expected core net income was due to an 8 percent drop in gross gaming revenue (GGR) to PHP14.8 billion ($253 million), particularly in VIP (down 33 percent) and mass tables (down 6 percent).
Maybank mentions that for FY17-19, 1Q profit on average made up 30-35 percent of full-year earnings. As a result, the brokerage revised its FY24 earnings estimate by 8 percent to PHP10.2 billion ($174 million) to reflect the 1Q24 performance, but increased its FY25 earnings estimate by 1 percent to PHP14.5 billion to account for the higher projections for Solaire Resort North.
The latest revision also reflects a 7 percent year-on-year earnings increase, with FY25 expected to account for 41 percent yearly growth.
Mendoza notes that the recently opened Solaire Resort North has over 160 gaming tables, more than 2,600 electronic gaming machines (EGMs), 21 food and beverage outlets, and over 520 hotel rooms. ‘The property intends to attract the mass domestic market of the greater Manila area,’ the brokerage indicates.
Maybank raises its forecasts for the new casino in terms of capacity and drop volumes. ‘We now forecast Solaire Resort North to contribute 15 percent and 22 percent of total GGR in FY24/FY25,’ compared to the previous forecast of 9 percent and 14 percent.
Meanwhile, the investment bank reduces Bloomberry’s target price by 3 percent to reflect the Global Gaming Asset Management (GGAM) settlement completed on April 30th this year.
To recall, the settlement was with the resort’s initial manager, GGAM, for approximately PHP16.78 billion ($290.7 million), by buying out the company’s shares.
The settlement will be deducted in the equity portion under ‘shares held by subsidiary’ in subsequent reporting periods.
In this context, Maybank increases its net debt assumption, as the settlement will reduce its cash. This lifts the long-standing regulatory overhang on Bloomberry.
In 1Q24, Bloomberry reported a strong performance in its domestic slot machine segment, however lower VIP and mass table revenues contributed to an 11 percent year-on-year decline in net income to PHP2.6 billion ($44.9 million).
