Gaming | Philippines Megaworld says online casino exposure to stay small, manageable

Megaworld Corp., the largest Philippine office landlord, says China’s ban on Manila-based online casinos servicing gamblers in the mainland will have no impact on its home sales and office leasing business.

Exposure to online casinos and residential sales to Chinese buyers are “small and manageable” and will stay that way in the next two years, according to Kevin Tan, chief strategy officer.

“While we are the biggest lessor of office spaces in the Philippines, the [online casino] issue won’t affect both our office and residential businesses because our exposure remains small and manageable,” Tan wrote via text message.

Megaworld shares have been punished as China pushes for a crackdown on so-called POGO or offshore gaming operators based in the Philippines that cater to mainland online gamblers. The stock has tumbled 22% this month and almost 43 billion pesos ($822 million) was wiped out in market value amid speculation a ban will hurt Megaworld’s residential sales and office rentals.

Chinese nationals account for 13% of Megaworld’s 215 billion peso residential sales take-up in the 18 months through June 2019 and its impact will be seen only when the projects are completed, Tan said.

Homes sold in 2018 will be booked as revenues in 2020 and “only” 4% of Megaworld’s 40 billion peso estimated home sales next year will be accounted for by Chinese nationals, he said. Should these buyers back out, the units will revert to inventory while related payments will be part of the company’s earnings, he said.

Online casinos, which now account for 12% of Megaworld’s total rental gross leasable area, will contribute about 8% of total leasing income and earnings before interest, taxes, depreciation and amortization in 2020, Tan said. In 2018, online casinos rented 7% of Megaworld’s total leasable area and made up 5% of its total rental income.

“We are quite comfortable with this exposure and we don’t see ourselves increasing the percentage contribution of POGO to our business in the next two years,” Tan said. Ian Sayson, Bloomberg