Premium Leisure equity deal is belle of the ball

Henry Sy's Belle Corp completes equity offering for Premium Leisure Corp ahead of the opening of its flagship project, City of Dreams, in November.

A 3.26 billion secondary share offering for Premium Leisure Corp was priced during the weekend at Ps1.65 per share, raising Ps5.38 billion ($120 million) for its parent Belle Corporation. The issue price represented a 10.4% discount to the stock's Ps1.84 close on September 18 when it was suspended and changed its name from Sinophil.

About 30 investors participated in a deal that, as expected, had a very strong domestic flavour. About 80% of the paper was allocated to local and long only funds, with the top five accounts taking 70% of the overall deal.  

There is also a greenshoe of 489.56 million shares, which could yet bump total proceeds up to Ps6.1 billion ($140 million). Pre-deal, Belle owned 89.68% of the 31.62 billion outstanding common shares, with the new transaction effectively doubling the freefloat.

CLSA acted as global co-ordinator, with Credit Suisse and Macquarie as joint-bookrunners.

At Ps1.65, the deal has been priced on a 2015 EV/Ebitda valuation of 12.9 times and 2016 valuation of 9.4 times based on syndicate consensus forecasts. The group has also committed to paying out 80% of its earnings as dividends, equating to a 2015 yield of 5.3% and 2016 yield of 7.3%.  

By contrast, fellow Filipino gaming counters Travellers International Hotel Group and Bloombery, are respectively quoted at 8.7 times and 14.62 times on a 2015 basis. Both stocks have significantly outperformed the Philippines Composite Index since the beginning of September.

In fact, the Philippines equity market has been one of the few global bright spots in recent weeks, with the PSEi rising 3% since the beginning of the month. This has provided Premium Leisure with a strong bedrock for its deal. 

All of the Philippines gaming stocks have also benefited from a positive re-rating, with Travellers International up 20.9% since the beginning of September, although it is still down 4.8% year-to-date. Bloombery has also risen 14.78% since the beginning of the month and is up an even more impressive 53.33% since the beginning of the year.

Premium Leisure's joint venture partner, Melco Crown, has also performed well, rising 12.1% since the beginning of the month, although it is still down 5.7% on a year-to-date basis.

Travellers International's share price has been spurred on by the news that its major shareholders (Andrew Tan's Alliance Global and Genting Hong Kong) have consolidated their second gaming franchise into it. Last week, the two announced they had paid Ps16.15 billion ($371.11 million) for a 95% stake in the $1.1 billion Bayshore City Resorts World development in Pagcor's Entertainment City.

Construction started this month, with a scheduled opening in the fourth quarter of 2018. The complex will include 1,500 hotel rooms under the management of the Westin Hotel Manila Bay, Genting Grand and Okura groups. There will also be a 3,000-seater grand opera house as well as shopping malls and a cinema.

In a research report, Maybank ATR Kim Eng estimates the development will host, "At least 375 tables and 2,250 slot machines under Pagcor regulations, which allow one table for every four hotel rooms and three slot machines and three ETG's for every two hotel rooms."

Bayshore City Resorts World is currently last in line of the four integrated casino projects on the 120 hectare Pagcor Entertainment City site in Manila Bay. First up, was the Bloombery-owned Solaire Resort and Casino, which opened back in March. 

When phase 1a is completed later this autumn, it is scheduled to have 360 gaming tables, 1,620 slot machines and 800 hotel rooms. 

Premium Leisure has also confirmed a November opening date for City of Dreams. Chairman Willy Ocier told local reporters the group hopes to have 80% of hotel rooms open by November, scaling up to 950 by the end of the year. 

As a result of its agreement with Melco Entertainment, Premium Leisure will receive 36% of City of Dreams Ebitda, with a further 9% going to parent Belle and 5% to a second SM Investments group company Leisure & Resorts.

Finally, the $2 billion Manila Bay Resorts project is provisionally slated to open in late 2015, although the group recently lost its local partner First Paramount Holdings. The foreign developer, Tiger Resorts Leisure and Entertainment, is owned by Japanese slot manufacturer Kazuo Okada.

Last week, its management indicated it was also likely to seek a listing on the Philippines Stock Exchange. 

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