Duterte policy signals revive confidence in gaming stocks
PRESIDENT Rodrigo R. Duterte has propelled gaming stocks after apparently backtracking from his hard-line stance against online gambling, although a cloud of uncertainty continues to hang over the business until the government issues a clear policy.
Leisure & Resorts World Corp. ( LRWC) and PhilWeb Corp., in particular, surged on the Philippine Stock Exchange yesterday, leading 96 other stocks in advancing against 97 decliners and 44 unchanged issues.
Shares in LRWC and PhilWeb surged toward their respective price ceilings, bucking the profittaking that pulled the benchmark PSE index 11.59 points or 0.15% down to 7,854.54 ahead of the post-Jackson Hole meeting remarks of US Federal Reserve Chairperson Janet L. Yellen.
LRWC closed P1.72 or 49.86% higher to P5.17 apiece from its P3.45 finish on Wednesday, with 28.3 million shares exchanging hands for P146 million. PhilWeb similarly advanced P2.70 or 50% to P8.10 after 6.4 million shares traded for P51.8 million.
Analysts traced LRWC’s and PhilWeb’s steep climb to Mr. Duterte’s recent hint that he was rethinking a ban on online gambling provided operators pay “proper” taxes and respect site restrictions for such operations.
“A couple of weeks ago investors dumped them because Duterte wanted to stop online gambling,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said in a mobile phone reply to a question.
“But because of the latest comment, today, a lot decided to enter these stocks again.”
Diversified Securities, Inc. equities trader Aniceto K. Pangan noted the president’s remark supported business prospects for LRWC and PhilWeb which relied on operating electronic bingo and casino games for revenues.
“On the optimistic side, there seems to be a change in policy from the first policy made by the president that the administration will never renew the licenses of operators and close online gaming altogether,” Mr. Pangan said.
In his first Cabinet meeting on June 30, Mr. Duterte directed the Philippine Amusement and Gaming Corp. (PAGCOR) to revoke the licenses of online gambling operators.
PhilWeb, which manages e- Games or Internet cafes dedicated for casino games as provider of the required software and associated facilities, would immediately plummet by P5.40 or 22.13% to P19 the following day.
LRWC, which holds a license to conduct Internet gaming enterprises and offer the relevant facilities, would decline by 48 centavos or 6.25% to P7.20 alongside.
The intellectual property management agreement between PhilWeb and PAGCOR has since expired, forcing the former out of business effective Aug. 10. Also, the regulator has made clear its intention to take the same action for other online and on-site electronic gaming operators.
POSITIVE DEVELOPMENT
In separate telephone interviews, PhilWeb President Dennis O. Valdes and LRWC Investor Relations Head Alfredo B. Reyes deemed the latest remarks of the president as “positive” development.
“Well, PhilWeb — we and our operators of the e- Games — are of course very happy to hear the president’s statement and we are hoping to hear from PAGCOR soon,” Mr. Valdes said, adding this latest development bolstered optimism that the company will receive a new license.
Also, Mr. Valdes welcomed the proposal of PAGCOR to issue licenses for online gambling operators exclusively catering to foreign players, saying: “As a business enterprise, you always consider all possibilities of creating value to our shareholders.”
While the statement was “quite positive” for LRWC, Mr. Reyes noted: “We don’t want to pre-empt everything that PAGCOR may have officially.”
“They’re also waiting for an official stance from the president.”
The president’s hard- line stance against online gambling had reverberated with Pacific Online Systems Corp., which operates online lottery betting stations through a subsidiary. The stock lost 62 centavos or 4.91% to P12 on July 1.
The negative reaction also rippled through casino operators Travellers International Hotel Group, Inc. and Bloomberry Resorts Corp., which dropped by 50 centavos or 1.47% to P3.34 and by nine centavos or 1.36% to P6.55, respectively.
“That was the concern when PhilWeb was crashing: that there will be spillover to other stocks engaged in a similar business,” AB Capital’s Mr. Felix said.
“But the positive impact of Duterte’s latest pronouncement was marginal.”
Pacific Online rose by 18 centavos or 1.62% to P11.30 and Bloomberry by three centavos or 0.56% to P5.40.
Travellers International, on the other hand, remained steady at P3.48.
IP E- Game Ventures, Inc. — which “actively” looks into opportunities in the gaming, leisure and entertainment sectors — received some boost from Mr. Duterte’s latest pronouncement, sending its shares climbing 0.02 centavos or 2.27% to 0.09 centavos apiece.
FINGERS CROSSED
“I think the rally will continue, based on the momentum,” Diversified Securities’ Mr. Pangan said yesterday.
“Tomorrow, when it comes out in the newspaper, investors will definitely buy back considering the fact that government would like to get the proper taxes, but how will it be done will be a question mark.”
Uncertainty, however, is expected to linger for gaming stocks until the government comes out with a formal policy.
“If you want to ride on the gains of PhilWeb or LRWC, I will tell you to do it just for tomorrow because, next week, we don’t know where this will go,” Mr. Felix said, citing the proposal of PAGCOR to limit online gambling offerings to overseas players would only expose the sector further.
Mr. Pangan also flagged a nagging uncertainty considering that Mr. Duterte has identified certain conditions before online gambling could resume in the Philippines.
“As of this point in time, you couldn’t tell… when the regulation will be set up… for the final go-signal to renew the license.”