October 27, 2014

PAGCOR looking to raise minimum investment for casino entrants

In a press conference yesterday, the head of state-owned gaming regulator Philippine Amusement and Gaming Corp (PAGCOR) said he has proposed to raise the minimum investment requirement for casino project proponents to US$1.5b from US$1b. He also said that the proposal stands a good chance for approval given that the country’s gaming industry is now more established. He noted that the PAGCOR has received letters of interest from several companies, including Caesars Entertainment Corp, to put up casino projects in the country.

Our take: We believe that the higher capital requirement will apply only to new entrants in light of the PAGCOR head’s statement that this will form part of the new terms of reference document that his office is preparing for casino proponents. Therefore, this should not apply to the first four private casino licencees given that their contracts have specifically set the investment requirement at US$1b.

We also note that Travellers International (RWM), Bloomberry Resorts Corp (BLOOM) and Melco Crown Philippines (MCP) have already met the initial investment requirement. Prospective expansion plans can easily bring their total investments beyond the US$1.5b threshold. If at all, the higher investment requirement will provide them some edge against new proponents.

However, the entry of additional new private players can spur competition beyond what the market has initially taken into account. It remains to be seen who will be the prospective new entrants and where they will be located given that the Entertainment City has already been partitioned among the four private licencees.

At any rate, given the time it will take to secure an approval from the PAGCOR and actually develop an integrated gaming facility, we believe that the existing players would have generated significant headway by the time the new players will operate. – WealthSec