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regulatory fees increased 32 percent YoY to $297.1 million, while game revenues were up 8 percent to $242 million. The huge rise in regulatory fees came during the second quarter, with revenues from licensed casinos increasing from $87.5 million in 2Q15 to $124.1million in 2Q16. The impact of the President’s clampdown on e-bingo operators and online gaming sites in recent months has yet to be reflected in the numbers. The property portfolio and balance sheet is likely to pique the interest of other operators and investors, but behind the numbers things are a little less impressive. “Most of PAGCOR’s properties are dated and in need of renovation,” one industry expert who declined to be named said. “They don’t compare to most private casino operations, especially Entertainment City. The majority are in good locations, but will require significant investment to be viable operations in the current market,” he adds. An inspired move
Big business PAGCOR is understood to operate 13 casinos across the country; three in Metro Manila, five in Luzon, and a further five in Visayas-Mindanao – all of which come under its Casino Filipino brand. In addition, it also runs 20 PAGCOR Clubs, a more upscale proposition where local residents are permitted to gamble. In terms of revenues, PAGCOR’s share of table game, EGMs and bingo topped US$466.2 million for FY15, while licensing and regulatory fees for the same period were a little less at $430.2 million, according to Widus International Leisure. Despite the turbulence caused by Duterte’s reign, in the first half of the year license and
Duterte’s request for the operator/regulator to divest its bricks-and-mortar assets could be seen as something of an inspired move. The value of its portfolio is undoubtedly significant, thought to be around $679 million, so the money raised from the sale coupled with the cash saved by not renovating its properties will provide a welcome boost to government coffers. What’s more, whoever buys its assets will cover the modernization costs, which in turn will drive revenues and the amount PAGCOR takes in fees and taxes. So who will be looking to get out their chequebook? “The advantages to a private operator are significant,” says Andrew Klebanow, partner at Global Market Advisors. “They would be buying a successful business in an environment where there is limited competition. While most major western operators may not be interested, there are a number of large Asian operators as well as some smaller, more nimble, mid-cap gaming companies that would find the acquisition of some of these casinos very appealing,” he adds. PAGCOR would undoubtedly like to sell its assets as a job lot, but in reality most investors will want to cherry pick the best. That said, the value of the license is massive, so even current poor performers have huge potential so long as investors are prepared to pump in significant capital in order to bring these properties up to standard.
PAGCOR’s role in the Philippine gambling industry has been a hot, and, at times, uncomfortable topic. There is a conflict of interest – despite PAGCOR chair Ms Andrea Domingo saying otherwise – in having an operator also acting as regulator. Their products and propositions may not directly compete with each other – but the blurred lines have been enough to deter more established gambling firms from entering the fray in the past. Separation of roles “It has long been argued that PAGCOR needs to define itself as the primary regulator of casinos and not as a regulator-come-operator,” says Klebanow. “A casino operator would prefer not to have a regulator as a competitor – this is what has kept most major casino investors out of the Philippines,” he adds.
GROSS GAMING REVENUE Y15 PHP 130b ($2.75b) Y16E
$5.8b (Source: Pagcor)
GGR 1H PHP78.23b Y15 SPORTS BETTING PHP593m H1 PHP224m
Government ends war on online gaming The Philippines government has formally ended a war on online gambling, with the government now focusing its attention on opening up the online gaming industry to more players. However, regulator PAGCOR says measures will be stringent, especially with regard to location. No eGaming cafes will be allowed within 200 meters from schools and churches. PhilWeb has formally reapplied for its license.
Asia Gaming Briefings | November 2016