In the latest market report, Morgan Stanley (MS) has identified investment opportunities in the Philippines gaming industry.
In this comprehensive report, MS states that “the Philippines is among the most overlooked by Emerging Market investors, who have been underweight in the market for the last five years.”
“Despite having an economy that rivals the sizes of Thailand, Malaysia, and Singapore, the Philippines’ stock market is only half as large as those of its ASEAN counterparts.”
Analysts Gareth Leung and Praveen Choudhary affirm a positive stance on the Philippines gaming industry, stating that the country was one of the fastest-growing gaming markets in Asia before COVID-19, with Gross Gaming Revenue (GGR) in Entertainment City rising at a 23 percent CAGR from 2014 to 2019.
In 2019, the Philippine GGR reached $4.2 billion, making it the third-largest market in Asia, close to Singapore’s $4.5 billion. Under these circumstances, MS believes that the “fast growth of the market will continue post-COVID,” driven by a growing local economy and inbound tourism.
In the second quarter of 2023, Philippine GGR has already reached 110 percent of the 2019 levels, while inbound traffic is only at 70 percent of the 2019 levels, and Chinese gamblers remain minimal.
MS prefers Bloomberry Resorts, the leading player in the Philippines gaming market, noting that the stock has risen by 41 percent year-to-date, compared to a 2 percent fall in the PSE index. However, the brokerage believes that there is more upside potential, as the market cap is still 20% below the peak of 2019. Bloomberry is set to open a major casino in Quezon City in 2024, roughly half the scale of the existing casino in Entertainment City.
MS projects EBITDA for 2024 and 2025 at 125 percent and 170 percent of the 2019 levels. “Historically, Macau gaming stocks have rallied 30 percent ahead of a major casino opening. We believe that positive consensus revisions will also provide support for the stock.”
According to the latest update regarding Bloomberry Resorts Corp’s new integrated resort in Quezon City, Solaire Resort North, the project seems to be facing further delays, and its opening is now expected to occur in the second quarter of 2024, whereas it was previously scheduled for the first quarter of 2024.
Bloomberry Resorts Corp. has reported robust results for the first half of 2023, with its GGR at Solaire reaching $554 million, marking a 41 percent increase from the first half of 2022. The growth has been primarily driven by the domestic market. This figure represents 110 percent of the level recorded in the first half of 2019.
Bloomberry’s net income rose by 160 percent year-over-year to $114 million. After excluding the impact of a one-time gain of $6.33 million from the sale of an asset, the consolidated net income would still have increased by 145 percent.
In a statement, Enrique K. Razon Jr., Chairman, and CEO of Bloomberry, has shown strong confidence in the Philippines gaming market, anticipating that the growth momentum in the first half of 2023 will continue into the second half of 2023.