Policies of the Philippine government have played a role in Melco Resorts and Entertainment (Philippines) Corporation’s decision to delist from the Philippine Stock Exchange (PSE).
The operator of City of Dreams Manila filed its petition for voluntary delisting at the PSE, which included a tender offer report by independent financial adviser FTI Consulting Philippines, Inc. (FTI CPI), stating, “Despite the industry’s positive outlook, it is not without risks brought about by the current regulatory environment.”
FTI CPI noted how as early as March 2017, state regulator Philippine Amusement and Gaming Corporation (PAGCOR) announced a five-year moratorium on the issuance of gaming licenses for Metro Manila-based casinos, on existing operators’ concerns of oversupply. “Though this is expected to protect the interests of these early investors, the moratorium on mega-casinos in Metro Manila may encourage other foreign players to invest elsewhere.”
FTI CPI also said that the current administration’s policies on casino and gaming were “quite unpredictable,” citing the August review by the Department of Justice (DoJ) of Landing International Development Ltd.’s lease contract for the creation of a resort. The justice department ended up recommending the termination of the contract, saying the ascribed market value of the property to be leased was much lower than those of nearby casinos.
Another cited instance was the halt to Galaxy Entertainment Group’s planned Boracay casino, the license of which had been acquired last March.
Other risks enumerated by FTI CPI were amendments to the country’s Anti-Money Laundering Act that require casinos to report to PAGCOR periodically in order to continue operations, as well as the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed into law last January 1. “Expected future amendments on the TRAIN such as changes on the application of value-added and corporate income taxes are expected to affect casino operators on a prospective basis,” the report stated.
Even with such an analysis of the investment risk, FTI CPI computed an equity valuation per share range of PHP6.11-PHP7.49 ($0.11-$0.14) for Melco Philippines.
The tender offer price of P7.25 ($0.13) was given for the purchase of about 1.57 billion shares, about 27% of the company.
Parent company Melco International Development Limited had previously stated that Melco Philippines’ listed status “in recent years has not contributed to its ability to raise funds despite considerable efforts and expenses being incurred to maintain its listed status.” It had also said that “our core focus for the near to mid-term continues to be Japan,” with recent legislation passed that would see the issuance of three casino licenses by the Japanese government, sometime in 2020.
