Okada Manila will steal the Philippines’ market share lead by 2019, moving ahead of Bloomberry, Melco Resorts Philippines and Resorts World Manila according to a new report by Morgan Stanley.
The finding follows stagnation of the country’s gaming stocks over the past three months, having previously rallied 60% from January through May, with concerns over the impact of Okada – which held its soft opening in March – cited as the primary reason.
While Morgan Stanley expects the ramping up of Okada Manila over the next six months to bolster the Philippines gaming market rather than cannibalize its rivals, the financial services firm also believes it is Okada itself that will benefit most.
“We expect the Philippines gaming market to be the fastest growing in Asia (25% CAGR in 2017-18) and cannibalization is not our concern,” said analysts Alex Poon and Praveen Choudhary on Thursday. “We expect EBITDA of existing operators to grow sequentially in 2H17 and 2018 due to slow ramp of Okada, thus, Bloomberry and Melco Resorts Philippines 2018e EV/EBITDA of 6-7x and 10% FCFE yield look attractive, compared to 8x based on 2Q17 EBITDA and net debt.
“We expect Okada to add US$1.2 billion of GGR by 2019 to the overall market, capturing 32% market share (Bloomberry 30%; Melco Resorts Philippines 25%). This drives market GGR growth of 35% CAGR over 2017-18 (VIP 43%; Mass 30%) for the integrated resorts or 25% CAGR for the overall market.”
Despite opening its doors in March, Okada Manila is still a long way from complete with 20 to 30% of its mass market tables still affected by ongoing construction work. The property opened with 100 hotel rooms operational and will gradually ramp-up to its full 993 available rooms over time.
However, tourist arrivals continue to surge with gaming growth across the IR operators growing alongside in 2Q17. Adjusting the numbers to take into account Resorts World Manila’s nearly month-long license suspension in June following the deadly lone wolf attack, GGR grew 20% sequentially for the second quarter across all IRs with VIP revenue up 28% and mass up 13%.
“We are not concerned about cannibalization, which is not visible in 2Q17,” Morgan Stanley said. “Strong tourist arrivals and NAIA Expressway have brought in more Chinese and Filipino mass customers from cities outside of Manila respectively.”
