With every passing day, confidence in the Philippines’ growing gaming industry is getting more and more pronounced and the latest to voice its confidence in the country’s burgeoning gaming market is foreign bank Credit Suisse.
Commenting on a new equity research on the Philippines‘ gaming sector, Credit Suisse estimated a 28-percent compounded annual growth rate for the country’s casino industry over the 2012-2018 period, numbers that could even surpass Singapore’s $5.6 billion gaming market by the end of the period. It’s not exactly the $10 billion in annual revenues Pagcor is estimating by 2017, but it’s still a relatively healthy number that positions the Philippines as one of the premier gambling destinations in the region.
“We expect Philippine casinos to exhibit higher profitability than regional peers in non-Macau Asia on the back of a more favorable cost structure,” the report said.
According to Credit Suisse, the Philippines has a number of advantages it can tap into to bolster its growing gaming industry, including favorable demographics, accelerating wage growth, signs of increased spending power, consumer confidence, and improved tourism awareness. And that’s not even pointing to the potential of spillovers of foreign high-rollers who could end up looking at the Philippines as a premium destination for gambling.
Longer sustained growth also points to the Philippines being in a better spot than Singapore, primarily due to stronger participation from junkets who would undoubtedly see the benefits of a more conducive regulatory environment and which, in turn, could lead to a strong and steady contingent of high-rolling VIPS flying to the country to get their gambling fixes satiated.
“We believe that Philippine casinos will be able to draw stronger participation from junkets—and consequently provide a more stable supply of credit to VIP clients—as lower tax rates in the country will allow for higher commissions to be paid to junket operators,” the report added.
Confidence in the Philippine’s gaming market spilled over to the foreign bank’s initiated coverage on two of the Philippines’ listed gaming stocks, Bloomberry Resorts Corp. and Belle Corp., both of which received “outperform” ratings and boasting of relatively healthy target prices amounting to P17.50 and P6.50, respectively.
There certainly appears to be a lot of confidence coming from Credit Suisse and its outlook for both Bloomberry and Belle with the foreign bank estimating that both companies could have positive free cash flow as early as 2014 and a net cash position by 2015.