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Tougher Market for PAGCOR Casino Sale as Local Players Embrace Entertainment City and Clark: Maybank Securities

May 25, 2023 Philippines Earnings & Filings

According to Maybank Securities research, a plan by Philippine gambling regulator PAGCOR to sell off its casino operations division is anticipated to be complicated by the growing number of domestic players who are leaving PAGCOR casinos for integrated resorts in Manila and Clark.

The market share of the country’s licensed casinos has significantly increased, with Manila’s Entertainment City seeing a share rise from 70% five years ago (1Q18) to 80% in 1Q23, while Clark has increased from 5% to 12% over the same period, according to a note published on Tuesday by Maybank analyst Miguel Sevidal.

In contrast, PAGCOR casinos’ market share decreased from 24% in the first quarter of 2018 to 8% in the first quarter of 2019.

“This suggests some movement by domestic players from PAGCOR’s Casino Filipino outlets to the integrated resorts, and is consistent with our observation of Entertainment City’s increasing wallet share in recreational and entertainment spending by locals,” Sevidal added.

This confluence of declining market share and subpar sector growth “makes PAGCOR’s Php80 billion (US$1.44 billion) valuation expensive,” he noted. In 1Q23, these patterns were once more evident.

According to Inside Asian Gaming, the privatization of PAGCOR casinos has been a top aim of PAGCOR Chairman and CEO Alejandro Tengco’s term in office. This will allow the organization to fully focus on its regulatory role and allay worries about a conflict of interest. Analysts, however, have questioned if the asking price is too expensive and have cautioned that as a result, interest in buying the agency’s 41 casinos may be muted.

Despite his concerns about PAGCOR, Sevidal pointed out that the Philippine gambling market as a whole is flourishing, with 1Q23 GGR up 21% sequentially and 107% annually. The GGR for Entertainment City is up 38% while the GGR for Clark is up 193% over the same quarter in 2019.

Following the 1Q23 results, which demonstrated consistent industry GGR growth that “outpaced the growth of state-run casinos,” Sevidal stated, “We retain our positive view on the Philippine gaming sector.”

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