Weak yuan hits casino firms, but prospects are up

Casino operator Bloomberry Resorts Corp. reported taking a hit from the recent devaluation of the yuan resulting in a P1.509-billion loss in the first nine months, compared with a year ago, but said at the same time that prospects for the company were getting better, particularly its local operations. 

In the third quarter alone, the company reported a P189-million loss; for the same period a year ago, it reported a P992-million net profit.

Despite a P703-million provision for bad debts in the quarter, the company said its net loss was a significant improvement from the P787 million it lost in the second quarter; it attributed this to its improving operations in the Philippines.

Bloomberry reported earnings per share (EPS) of P0.017 from the third quarter’s P0.094.

Unicapital Securities head of research Lexter Azurin said the weaker yuan had probably reduced the spending power of the Chinese and South Koreans, the main targets of Philippine gaming companies.

Bloomberry’s loss in the past three quarters was in contrast to the P3.299-billion profit it reported last year.

The firm owns and operates, through subsidiaries, Solaire Resort & Casino and its South Korea affiliate Jeju Sun Hotel & Casino.

It reported unaudited consolidated revenues (net of promotional allowances) of P19.424 billion, up from P16.975 billion in the same period last year.

Nikkei Asia Review, quoting another analyst, played down the yuan’s impact, pointing out that the bulk of gaming revenues still comes from domestic gamblers, not foreign tourists.

“There could be some effect, but it should not be significant or alarming,” said Rommel Rodrigo at Maybank ATR Kim Eng Securities.

China started to devalue the yuan amid falling exports and, as a result, gaming companies are hurting from weaker spending by tourists. Local casino firms had posted disappointing first-half results due to stiff competition and mounting expenses.

Melco Crown reported a loss of P4.9 billion for the six months ending June.

Two more big casinos, worth at least $1 billion each, are set to open in the next three years, as the country strives to become a major global gaming hub.

Bloomberry’s cash operating expenses in the three months to September declined 6 percent quarter-on-quarter to P3.985 billion.

Inclusive of P703 million in provisions for doubtful accounts, Ebitda (earnings before interests, taxes, depreciation and amortization) reached P2.406 billion, which was flat year-on-year, but 53 percent higher quarter-on-quarter.

Net losses were narrower quarter-on-quarter to P189 million, according to Bloomberry.

For the quarter ending September 30, Bloomberry reported revenues (net of promotional allowances) of P7.094 billion, 29 percent higher year-on-year from P5.512 billion, and 19 percent higher quarter-on-quarter from P5.986 billion.

On a sequential basis, Philippine operations reported P281 million in net profit, while South Korea generated P471 million in net losses. Profitable Philippine operations reduced the consolidated third-quarter net loss to P189 million, significantly narrower than the P787-million loss reported in the previous quarter.

“Our investments in the Sky Tower are beginning to show returns. Given the improvement in Philippines operations and the opening of a new revenue stream, we are hopeful that returns woulf continue to gain higher ground,” Bloombery Chairman and CEO Enrique K. Razon Jr. said.

Gross gaming revenues and non-gaming revenues for the first nine months of the year hit P24.551 billion and P1.384 billion, respectively.

On a year-on-year basis, these grew by 14 percent and 53 percent, respectively, with strong growth across all gaming segments and boosted growth in non-gaming revenues, with the opening of Sky Tower in November 2014 and the consolidation of South Korean operations beginning in the second quarter.

Jeju Sun, in its first 15 days of casino operations, accounted for less than 1 percent of consolidated gross gaming revenues and 13 percent of consolidated non-gaming revenues.

Gaming continued to be the biggest generator of consolidated gross revenues in the first nine months, accounting for 94.6 percent of the total, followed by hotel, food and beverage, as well as retail and others at 5.1 percent, with the balance of 0.3 percent taken up by interest income.

Gross gaming revenues and non-gaming revenues in the third quarter grew year-on-year to P8.973 billion and P502 million, respectively.

Gross gaming revenues for the quarter increased by 21 percent over the same period last year, while non-gaming revenues grew 82 percent year-on-year, helped by the contribution from South Korea.

Compared with the previous quarter, both gross gaming revenues and non-gaming revenues also continued to grow by 20 percent and 10 percent, respectively.

Stripping out promotional allowances, net gaming revenues in the third quarter also grew by 26 percent year-on-year to P6.593 billion.

From the previous quarter, net gaming revenues grew 20 percent from P5.476 billion.

Promotional allowances, as a percentage of gross gaming revenues. was at 26.5 percent for the third quarter, both lower than the 29.3 percent reported in the same period last year and the 26.8 percent reported in the previous quarter.

Bloomberry’s cost-containment initiatives have continued to show tangible benefits, with cash operating expenses in the third quarter declining 6 percent quarter-on quarter to P3.985 billion.

Inclusive of P703 million in provisions for doubtful accounts, Ebitda for the third quarter reached P2.406 billion, essentially unchanged from the P2.434 billion reported in the same period last year and 53 percent higher than the second-quarter Ebitda of P1.573 billion.

Bloomberry is the owner and operator (through its subsidiaries) of the Solaire Resort & Casino and Jeju Sun Hotel & Casino. Solaire is the first property to open in Entertainment City of the Philippine Amusement and Gaming Corp. (Pagcor). Solaire became the first integrated resort in Entertainment City with the opening of Sky Tower in November 2014.

Aside from a 312-key all-suite five-star hotel, Sky Tower features other amenities, such as The Theatre, a 1,760-seat Broadway-style theater; The Macallan, a luxury cigar and whisky bar; 1,000 square meters of meeting space in The Forum; the Star 9 international karaoke bar as well as additional gaming facilities. A high-end retail area with a gross floor area of approximately 10,000 sq.m. and an expansive nightclub will also be opening soon.