Melco Crown Philippines Resorts Corp. is the best-performing casino stock in the world this year. To punters playing baccarat at the company’s City of Dreams venue in Manila, that’s no surprise.
“Foreign players have multiplied and they’re mostly Chinese,” said Fernando, 49, a Filipino supply manager who has been gambling at City of Dreams—which boasts gold-tinted windows and a children’s theme park—since it opened officially in 2015. He didn’t want to give his surname. “There are times that you need to wait to get a seat at the tables and when there’s a thick crowd it’s not rare that you’re playing with a Chinese tourist.”
China is key to this year’s 122 percent surge in shares of Melco Crown Philippines, a subsidiary of Hong Kong gaming behemoth Melco Resorts & Entertainment Ltd. The close connection with Macau puts Melco Crown Philippines in the box seat to benefit from President Rodrigo Duterte’s bid to ease tensions with Beijing. At the same time, an anti-corruption drive in the former Portuguese colony is sending gamblers south to Manila.
Ironically, the company’s link to the Chinese betting enclave—Melco Resorts owns four casinos in Macau—has been a factor in its stock’s success. The Philippines’ embrace of phone gambling, banned in Macau last year, is also a big plus for Chinese punters.
Since the end of 2015, Melco Crown Philippines has returned almost eight times more than a Bloomberg Intelligence index of global casino stocks. The company is posting the steepest gains among casino operators with a market value of at least $500 million this year—and it only just started turning a profit.
Among Philippine casinos, “City of Dreams Manila has the strongest Macau connection, so the expectation is at some point its gaming revenue will grow faster and become the biggest in the industry,” said Noel Reyes, who helps manage $1.2 billion as chief investment officer at Security Bank Corp. Melco Crown Philippines “is getting revalued on prospects it will soon become profitable because of the renewal of ties between Beijing and Manila.”