Resorts World Manila to double casino capacity
Catering for Philippine tourism boom following Alliance Global Group projected 15% profit increase
A year after taking over from his father as chief executive officer, Alliance Global Group’sKevin Tan says tourism and consumer spending in the Philippines will drive growth, as his conglomerate doubles capacity at its Manila gambling resorts.
Resorts World Manila, Alliance’s first gaming property, is expanding this year and the second resort will begin opening in 2021, Tan said. Westside City, the group’s second casino complex in the capital, will also boost the share of revenue from gaming by almost half to 20 per cent over five years, he said.
The casino expansion, as well as a shift to premium products by Alliance’s distiller Emperador and a property boom in the country, has Tan expecting to increase profit by about 15 per cent a year at each subsidiary over the next five years, he said.
Alliance Global Group covers real estate, hotels, casinos and distilleries
Consumer spending jumped more than 6 per cent in the first quarter in the Philippines, where it accounts for more than three quarters of an economy that is forecast to be one of Asia’s fastest growing this year.
“Fundamentally, the Philippine economy is quite strong, and consumption is also quite high,” Tan said. “We will see a lot of our businesses thriving in this kind of environment.”
Tan’s group covers real estate, hotels, casinos and distilleries, including the local franchise of McDonald’s. Its unit Megaworld is the largest landlord for call centres in the Philippines, with more than 63 office towers, mostly in 24 mixed-use developments across the country.
“Hitting double-digit earnings growth at each subsidiary and sustaining the recovery in its challenged units could put Alliance at par with larger conglomerates,” says Rachelle Cruz, analyst at AP Securities Inc. “Valuation-wise, Alliance trails the big boys as – except for Megaworld – its units are yet to reach full potential.”
Alliance shares are trading at eight times 12-month estimated earnings compared with 15.47 times average for an index of Philippine holding companies. Conglomerates SM Investments, JG Summit Holdings, and Ayala, which own property developers, are trading at 15 times forward earnings or more.
Gaming unit Travellers International Hotel Group, a venture with Genting Hong Kong and builder of Manila’s first casino resort, is betting on new capacity to maintain earnings growth after a profit surge in 2018 ended a three-year decline.
The rebound also represents a comeback for Travellers from a June 2017 fire at its Resorts World Manila casino that left 38 people dead. The blaze, set by an arsonist, cost the company about 60 million pesos (US$1 million) a day in lost revenue and cut traffic by half when it reopened.
“The next five years will be very exciting,” Tan said. “I am very confident about how well Travellers will do and how much contribution it will have to our overall top line. Westside will easily double our capacity.”
Rising consumer purchasing power in the Philippines is also helping the group’s liquor business along with growing overseas sales. The shift by Emperador, the world’s largest brandy maker, to more premium products may help the brand weather a planned increase in alcohol taxes, said Tan.
At the same time, Megaworld will remain a key growth driver for the group with a 300 billion-peso (US$5.8 billion) budget in the five years through 2024 to build more flats, office towers and shopping malls. “We are still experiencing a boom in the real-estate sector,” Tan said.
