The chairman of Philippines government-owned PAGCOR believes that Macau’s Melco Crown Entertainment is looking to participate in the PAGCOR City project.
“I think they’re serious,” said PAGCOR Chairman Cristino Naguiat in an interview in Shanghai early in the first week of September. Naguiat said that discussions with Melco were “still ongoing.”
According to Bloomberg, Naguiat was accompanying Philippines President Benigno Aquino on a state visit to China when he made the comment.
In the week that followed, no word on the subject was forthcoming from Melco Crown.
The PAGCOR City project is the Philippines’ attempt to duplicate the success seen in Macau and Singapore. Since 2008, the government has awarded four licenses for entertainment complexes with gaming to be built in Manila. Each licensee is to invest a minimum of $1 billion over five years.
Those licensed so far include Philippine property developer Belle Corp., Philippine ports operator Enrique Razon’s Bloombury Investments Holding Inc., and a joint venture involving Genting Malaysia Bhd and Alliance Global Group Inc. The fourth licensee is Japanese company Universal Entertainment Corp., formerly Aruze Corp., which has yet to start construction.
Bloomberg reported that Belle and Bloombury have begun construction and that the other projects will commence by the first quarter of 2012. Universal reportedly started its work in June of this year and plans to open by 2014.
Leo Venezuela, a Manila- based analyst at CLSA Asia-Pacific Markets, said, “The government’s strategy of bringing in key investors is good as it creates a critical mass. You can’t just have one or two players and call it a gaming center. You have to have a handful to provide variety and a more dynamic industry.”
PAGCOR, the government-owned casino operator and originator of the concept of a Manila Entertainment City, has run into problems this year, including alleged improprieties involving former PAGCOR head Efraim Genuino.
At the time, Melco Crown co-CEO Jamie Packer was courted by Genuino and former PAGCOR President Butch Francisco. After considering the project for several months, Packer reportedly decided against any investment.
Commenting on the Melco Crown interest in PAGCOR City as reported in the media, Sterne Agee analyst David Bain published a note expressing some doubt as to the likelihood of such a move by the Macau-based operator.
“We believe such discussions would be decidedly preliminary.” Bain wrote.
Bain granted that Melco Crown has stated a desire to expand in Asia, but pointed out that the company’s attention has run more toward future opportunities in Japan and Taiwan.
Bain wrote, “We believe MPEL, similar to LVS (Buy, $45.10) and WYNN (Neutral, $147.90), seriously review/discuss/consider certain Asian casino opportunities as they are uncovered or presented and that the Manila opportunity is no different in this respect.
“MPEL remains one of the better positioned gaming companies to lobby for and win one or several potentially high ROI Asian casino gaming expansion opportunities over the next several years, in our view. However, we do not see an MPEL/Manila deal happening anytime soon.”
Bain stated the belief at Sterne Agee that Melco Crown would be best served by “maintaining a conservative balance sheet via additional equity capital for Macau Studio City and to remain nimble for other smaller potential projects over the intermediate term, such as Phase 3 at City of Dreams (additional hotel tower).”
