Investment bank Morgan Stanley has expressed doubt over the ability of Philippines gaming regulator PAGCOR to privatize the 41 casinos it operates, describing the agency’s Php80 billion (US$1.47 billion) asking price as too high.
In a weekend note, Morgan Stanley analysts Praveen Choudhary, Dan Chee, Jeffrey Mak and Gareth Leung observed that some Philippines gaming stocks had risen due to market excitement over PAGCOR’s privatization move, but added, “We think the asking price by PAGCOR is too high and buying interest could be low.”
The issue of PAGCOR’s casinos has again made headlines over the past week after PAGCOR Chairman and CEO Alejandro Tengco revealed privatization was among his top priorities, stating he “hopes to privatize the state-run gaming firm’s self-operated casinos nationwide”, according to a press release.
Tengco added that PAGCOR has been “open to talks about privatization but [has] ensured that the welfare of employees who will be affected by such management decision will be taken into consideration.”
With PAGCOR casinos having generated gross gaming revenues of around Php37 billion pre-COVID, Morgan Stanley said the Php80 billion asking price implied an 11x EV/EBITDA ratio assuming a 20% margin and that the assets are debt free. The analysts also recommended Solaire Resort operator Bloomberry Resorts Corp – an obvious candidate to potentially acquire some PAGCOR casinos – focus instead on development of its Solaire North property in Quezon City, due to open in early 2024.
However, they described another PAGCOR initiative – the likely expansion of iGaming offerings in the Philippines to include eSports, live dealer games and more – as “positive”, pending the release of more details.
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