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Bearing out the public perception that the stock market may be akin to a casino, a number of so-called gaming stocks have become the perennial gambling vehicle of choice among local punters.
This category of equity securities has become so economically and strategically important that the local bourse’s leadership felt behooved to create a special sub-sector for them. Thus, starting this month, “Casinos and Gaming” officially became a stock market subcategory. Under it are the “owners and operators of casinos and gaming facilities.” The subcategory also “includes companies providing lottery and betting services.”
Devoted punters and day traders have a deep-abiding attraction to these gaming stocks. Even serious equity analysts likely have some in their trading portfolios, although none of them would willfully admit to this in public. It’s like the dirty secret of the market.
Even so, not a month goes by without someone asking this writer for an opinion on one or the other of these gaming stocks. This opinion piece, in fact, comes about as a result of a request from the editor: “What do you think of the gaming stocks such as BLOOM, LR, and BEL.” So, here goes.
BLOOM, LR, and BEL represent the stock symbols for the following listed gaming companies: Bloomberry Resorts Corp., led by Enrique K. Razon, Jr., Leisure & Resorts World Corp., and its partner Belle Corp., whose strategic local investor would be the Henry Sy group.
These local gaming stocks are the perfect vehicles for speculation. Why? Because no one has any information or idea what these gaming companies are really up to. All their proposed casino-hotel-entertainment projects are either in the process of being built, or still on paper, or remain in the talking stage of development. There is no business to speak of at all, as yet, much less any cash flow to be evaluated. It’s a perfect setup.
With a blank slate, so to speak, anyone is free to put any kind of story or value on these stocks. For instance, the little that is known about these companies is that they will be building multi-billion-dollar casino-hotel projects (in the range of $1 to $2 billion per hotel project) in the old Nayong Pilipino site near the international airport.
To put these figures into perspective, the competing destination of Singapore had the Las Vegas Sands and Genting Singapore spending more than $10 billion on two gaming resorts that opened in 2010. That just goes to show that it takes very deep pockets to enter this highly competitive industry.
Next point is that local punters should consider themselves as venture capitalists since they are, in essence, bankrolling an unknown product and service that remains in development and which may take many years to pay off, if at all. That is the quintessence of being a venture capitalist – the investor takes on high risks and great uncertainties in the hope of having a large payoff in the future.
The main difference between the gaming stock punter and a venture capitalist is that the latter also gets to have a large slice of the company and representation in the board.
These great uncertainties may be seen in the wild swings in the gaming stocks’ prices. Over a period of 52 weeks, BLOOM, for one, zoomed from about P4.30 to a high of P102 before plunging and recently closing at around P10. The stock is still up 128% on a year-on-year basis but don’t forget to say a little prayer for the people who bought at more than P100.
An analyst who trained under this writer was recently tasked to make a study on BLOOM and she asked how to go about it. Here are some of the factors that the investor and analyst may consider.
Visitor arrivals to the Philippines number between two and three million a year. On average, based on government statistics, a tourist spends between $80 and $90 a day and stays roughly 2.5 nights in the Philippines. That’s less than P4,000 a day.
Further, the typical tourist would spend $20 to $30 a day on accommodation, roughly the same daily amount on food and beverage, and another $25 to $30 on shopping. These amounts are way down from the previous high of $120 a day per tourist.
Clearly, the recent tourism data don’t bode well for the casino hotel projects. That is, if the numbers don’t recover to their previous highs.
In contrast, in US casino-hotels, the average patron would spend $125 per day for the hotel room, and $81.75 for food, and $30.38 for drinks. In addition, on average, each patron would spend $80 to $85 per room per day on gaming tables, and $117.62 per room per day on slot machines.
The proponents of the local hotel-casino projects state that they expect to attract at least one million tourists out of the total tourist arrivals in the Philippines. Do the math: Given one million patrons plus the spending patterns of gambling patrons in the developed markets, what would the local gaming companies earn in the coming years?
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