Media reports of MPEL involvement in Philippines deal are probably accurate.
We think MPEL may have reached a deal to invest US$200-300 million in an integrated casino resort project already under construction. The project is a joint venture between local property developer Belle Corp and Leisure & Resorts World, a Philippine bingo operator. Total project cost may be as high as $1 billion.
MPEL would manage the casino and together with its investment, could have rights to over 50% of the cash flow. This looks like an incredibly high ROI opportunity for MPEL. We believe that Resorts World Manila, the only integrated casino resort in the Philippines, is generating $250-300 million in EBITDA on its current $650 million investment. Even if one assumes only $200 million in EBITDA for the Belle Casino, that would generate an ROI of at least 50% to MPEL.
Obviously, there are regulatory issues in closing this transaction; not so much with MPEL, however. The Australian authorities may have issues with James Packer and Crown doing business in the Philippines. Some foreign regulators have voiced concerns about PAGCOR serving as both an operator and regulator of casinos. Of course, the Philippines also maintains some notoriety with regards to corruption.
