Philippines to be fastest growing gaming market in 2015, Macau top pick

Wednesday 7th of January 2015

The Philippines is expected to be the fastest growing gaming jurisdiction in Asia, with gross gambling revenue likely to surge 32 percent in 2015 on the back of new openings, though the market may not be as deep as had been hoped, according to a report from Citi.

The growth will take the total size of the market to $2.7 billion in 2015, from $2.05 billion in 2014, a gain of 9 percent.

“We believe the exceptional growth in the Philippines gaming market seen in 2014 was a perfect example of “build it and they will come,” the report said.

Melco Crown Entertainment recently held the soft opening of its City of Dreams resort in Manila in what is expected to be a game changer for Manila’s goal to become an entertainment hub.

Melco will be able to provide its Macau experience and has a tax incentive to grow the VIP business given the lower rates in the Philippines than Macau.

That said, the investment firm said it has scaled back its previous assumptions for the Philippines from growth of 42 percent as it is seeing signs that the cannibalization rates from the existing Resorts World Manila property may be worse than had been expected.

Travellers reported gross gaming revenue of PHP 7.2 billion in 3Q14, lower than the P7.7 billion at Bloomberry Resorts. Solaire has become the largest casino in the Philippines, with an estimated market share of 29.4 percent compared with 28.8 percent at RWM, it said.

The signs of cannibalization are alarming, “as it shows that the “pie” might not be big enough for everyone to see GGR growth in this growing market.”

GGR at RWM is likely to have fallen 9 percent in 2014 and may fall a further 6 percent in 2015 as COD comes on line.

Still healthy economic growth in the country is expected to underpin demand.

“On our estimates, City of Dreams Manila will become the market share leader and capture 23 percent of total market share by 2018, followed by Solaire at 20 percent and

Resorts World Manila at 16 percent.”

Despite the predicted strong growth in the Philippines, the Citi analysts said Macau remains the top pick globally. The firm echoes views from other analysts that the outlook will remain grim in H1, with a GGR decline forecast of 29 percent, but will begin to pick up again in the second half driven by new resort openings.

“The 1,350-room Galaxy Macau Phase 2 and 1,600-room Studio City should catapult GGR growth in 2H15. We forecast the six operators to generate total property

EBITDA of US$2.53bn in 4Q15E – only 5 percent below the record-high US$2.67 billion in 1Q14.”