STOCK REPORT

April 27, 2016

Recommendation
The Company may have registered net loss for the full year but it
seems that the market is factoring the increase in revenues as
share prices increase upon release of earnings report.
Despite being in the red, the company is still aggressive in
looking for areas to further expand to. That growth story could be
bought however it wont be visible until the year 2017.
In terms of operations we are still worried about its receivable
turnover. They still managed to produce decent GGRs but it is
noticeable that their bad debt provisions increased and their
aging of receivables had a sudden jump in the impaired section.
But Enrique Razon said they have already reduced their bad debt
provisions, hence the guidance of having a better earnings report
for 2016.
We made significant changes in our target price. At current prices
we think that the company is trading at premium with EBITDA
multiple of 14.8 x as compared to the regional index of 13.4x.
From there we derive our FV of P5.00. We maintain our HOLD
recommendation.
Updates, Disclosures & News

Management disclosed that BLOOM will attain a positive

bottom line for 2016 on account of more revenues on
each segments and the significant reduction of bad
accounts that added up its bad debt provisions.

South Korean unit T.H.E. Hotel, was suspended for a

month on account of tax raps from the previous
management. The suspension has nothing to do with
current operations.

Despite regional decline in the Asian gaming market, the

Philippines has registered double digit growth as
PAGCOR chairman Cristino Naguiat said that Philippine
GGR has reached 17% growth to P130-b ($2.75-b) for
2015, just 3% shy from its target of 20% growth.
Junket operator revenues also increased to P5-b from
previous years P2-b as casinos contract more operators
to rake in more players.
AMLA probe to have effects on casinos, particularly
BLOOM as their name was mentioned in the senate
hearings. BLOOM is now undertaking measures like
freezing $107-m worth of chips and returning of money if
the court says so.
BLOOM reports loss of 3-B loss for 2015 mainly due to
higher interest expense, depreciation costs and setting
up of higher provision for doubtful accounts.

Enrique Razon sees tighter casino competition for 2016

and 2017 as new players come in the Manila Bay area
which will add up to the existing casinos who are hungry
to get back income from their negative earnings in 2015.

BLOOM sets to venture out in Argentina and Cyprus.

BLOOM will bid together with Nagacorp of Cambodia
and Melco-Hardrock tandem for the Cyprus deal. The
Argentina deal is still in talks with the local government
of Argentina.

Page 1 of 7

HOLD

Fair Value
P
5.00

Potential recovery from the onslaught

of the VIP GGR decline.
Korean unit and Sky Tower now
contributing to bottom line
Possible entry in Argentina and Cyprus
Negative earnings, flat revenue growth
for 2015
High receivable impairment growth
Tighter competition between firms
Stricter regulation due to AMLA
compliance.

Bloomberry Resorts Corporation (BLOOM) owns

and operates Solaire Resort & Casino, the countrys
first premium/luxury hotel and gaming resort in
Entertainment City.
The company is one of the top 4 private gaming
operators in the Metro Manila Area.
It commenced commercial operations on March 16,
2013
Stock Information
Last Price

4.55

Performance (YTD)

-0.22%

52-week range

P2.90-12.42

Beta

1.73

Outstanding Shares

11,001.7-m

Market Capitalization

P49,837.8-m

Free Float Level

15.5%

Par Value

P1.00

Sector
Subsector
Major stakeholders
Fiscal Year
Previous Rating

Services
Casinos & Gaming
Prime Metroline
58.00%
Quasar Holdings
8.35%
Dec. 31
Hold
August 11, 2015
P9.80

Board of Directors
Chairman& CEO

Enrique K. Razon Jr.

President& COO

Thomas Arasi

Directors

Jose Eduardo Alarilla

Christian R. Gonzales
Donato C. Almeda

Independent Directors

Jon Ramon Aboitiz

Carlos C. Ejercito

RCDC Research
Paul Michael A. Angelo Your Private Broker.
Email: paangelo@reginacapital.com

ANALYSIS AND RECOMMENDATION

Expansion Update
Gaming Industry Update
After the Chinese anti-corruption measures that significantly
reduced VIP players not only in Macau but also in the
Philippines, our local units have already implemented some
alternatives to compensate for the potential losses they might
incur in 2016. This was done by strengthening their nongaming facilities.
Despite lower net income of gaming firms in the Philippines
we expect revenues to further increase by 6%-8%.
Local mass market segment is the new trend in the region.
The local government of Macau recommended to the casino
community to improve on their non-gaming facilities as
remedy for the massive decline in their gaming revenues. For
BLOOM, the local mass market segment contributed 82% of
overall gaming operating margin of the company vs. last
years 63.3%. This confirms our assumption which is in line
with the current trend. We expect this contribution to continue
on until 2017.
Segment Performance

Breakdown of Revenues
100%

6%

4%

6%

93%

95%

93%

2013

2014

2015

80%

60%
40%
20%

Hotel, Food and Beverage

Retail and Others

Gaming revenue growth went flat for 2015 on account of the

global gaming decline due to lower VIP uptake. Food and
Beverage segments reported a 49.9% increase in its sales
take-up while Retail and other segments had an 81.4% boost
in sales due to the full operations of the SkyTower1 and the
additional contribution of Phase 1A.

60,000

13%

40,000
30,000

20,000

5%

87%

95%

10,000
Segment Liabilities
Philippines

Segment Net Assets

Korea

The Korean unit of the firm was financed through a

combination of debt and in-house financing. 13% of overall
liabilities of the company pertain to the Korean unit.
In turn it contributes less than 1% of the companys total
topline for 2015, but that is mainly due to T.H.E. Suns gaming
segment being suspended due to previous managements tax
raps, in effect the company operated only 2 months.
Based on estimates, we can see the Korean unit producing
~7% of the companys topline for 2016.

Page 2 of 7

BLOOM subsidiary Surestre plans to construct and open up a

casino resort in the Vertis North region. Located away from the
Entertainment City, they can have a chance of capturing the
Northern NCR market. Pretty much the same strategy of RWM
when they placed their casinos near the Terminal III station to
be nearer tourists and is located near the Entertainment City
and Makati CBD.
We believe that they intend to put up more non-gaming
facilities in the P1.9-b lot acquired from the NHA, given the
current status of the gaming industry moving forward.
Peer Comparatives
There will be 2 more entrants in the Entertainment City this
coming 2016 and 2017: we have the Tiger Resort of the
Okada group and the Bayshore area. RWM also intends to put
up an additional complex in the Entertainment City but does
not consider this as a priority as of the moment.
Management said that casinos are currently facing oversupply
of casinos. They are building too many casinos too fast, and
market is not growing as it wants it to.

DATA*

BLOOM

RWM

MCP

GGR

23,322

24,200

13,100

Foot Traffic

16,800

18,200

16,000

5,182

6,162

(1,901)

(3,375)

4,021

(9,100)

EBITDA
Net Income

*All in Php Mn except Average Daily Foot Traffic

We can consider BLOOM as the middle child among the three

gaming firms located in the central gaming district. RWM
having more experience is the only company to register green
figures.
Current legislation update

Total Composition
50,000

It also placed bidding in Cyprus. For the construction and

operation of the countrys first Casino Resort, Fellow
competitors for the bid will be Melco-Hardrock and Cambodias
Nagacorp. We expect updates regarding the deal to be
announced within the year.

Comparative Data of Casinos as of FY15

0%

Gaming

BLOOM is in talks of putting up a casino in Argentina. This has

a high chance of being approved, as the General Manager of
Solaire du Argentina is also the head of the Casino
organization in the country.

There is currently a bill being pursued in Congress that

recommends players to deposit a certain sum of money before
playing in casinos. This has the intent of discouraging those
players with low income from gambling. Once this bill is
passed, foot traffic for the company could be affected.
There has also been some movement to widen the scope of
the current Anti Money Laundering Act (AMLA) to include
casinos due to the $81-m Bangladesh heist. If implemented,
this could trigger a slowdown in the uptake of revenues
especially in the VIP gaming segment, as VIP players could be
more scared in putting their money in casinos.
With current election movement and the assumption of the
new administration after elections (a.k.a. the Honeymoon
period), we dont expect any of these legislations to move
within any point in 2016, unless another issue related to this
matter resurfaces.

Your Private Broker.

KEY RATIOS AND LIMLINGAN FINANCIAL MODEL

Key Financial Data
Ratios

2012

2013

Return on Equity

(4.0%)

(8.2%)

Earnings per Share

Return on Assets
Assets to Equity

15.9%

2016E

in Php Million

(15.1%)

(11.4%)

Ave Total Assets

69,206.1

Ave Total Debt

45,468.2

Ave Total Equity

23,738.1

Net Income After Tax*

(3,375.3)

(0.12)

0.38

(0.34)

(0.20)

(10.7%)

17.4%

(13.1%)

(8.1%)

0.01

0.30

0.35

0.35

0.43

(2.4%)

(3.3%)

6.0%

(4.6%)

(3.5%)

1.7

2.5

2.6

3.2

3.3

774 Altman's Z-Score

7.4

3.6

4.5

2.1

Price to Earnings

(203.2)

(69.3)

32.7

(15.1)

(22.6)

8.1

5.7

5.2

2.3

2.6

1.64

1.51

2.33

1.97

1.74

Price to Book Value

Net Book Value per share

2015

2015

0.07

Profit Margin
Asset Turnover

2014

Company EBITDA registered a negative figure on account of really flat revenue

despite encouraging VIP players through extending credit. This credit extension
resulted to higher bad debt provision.

The company has registered aggregate net loss of P617-m over the past three
years, wiping out their registered 2014 net income.

Altman scores are still above the distress level as the market still has remaining
appreciation for the companys development.

Interest Expense
Asset Income

2,889.5
(1,208.1)

Debt/Equity

1.92

Cost of Debt

4.77%

*Does not include Comprehensive Income

**Asset Income = NIAT+ Interest Expense

Limlingan Financial Model(C)

ROE = ROA + D/E * (ROA - Cost of Debt)
LFM Inputs
Return on Assets

2015
(1.75%)

Debt/Equity

1.92

Cost of Debt

4.77%

ROA CD

(6.51%)

Return on Equity

(14.22%)

Case 1: Improve Efficiency 20%

Return on Assets

Most of the companys loss was incurred in 4Q15. Despite the company
registering higher revenues in the first 3 quarters, it was pulled down by the lower
revenue growth in 4Q. Net income has been consistently declining due to higher
junket operator costs and more aggressive marketing.
Debt Service
in Php Millions, except for ratios
2013
2014
2015
EBIT
Interest Expense
Interest Coverage Ratio
EBITDA
(a) Total Interest-Bearing Debt
(b) Present Value of Ordinary Annuity3
(a/b) Implied Debt Amortization
(c) EBITDA less: Implied Debt Amortization

(923)

7,265

326

371

761

2,167

(2.5)

9.5

0.2

1,116

10,083

5,182

17,633

32,608

36,804

4.80355

4.80355

4.80355

3,671

6,788

7,662

(2,555)

3,295

(2,479)

2. Based on the tenor and the interest rate of largest long-term debt

This is an indication that the company cannot pay off its interest expense using its
cash generated through operations.
The institution contracted long-term debt for the financing of its Skytower, hence
the increase in interest expense.

Page 3 of 7

(2.09%)

Debt/Equity

1.92

Cost of Debt

4.77%

ROA - CD

(6.86%)

Return on Equity

(15.24%)

Case 2: Increase Leverage 20%

Return on Assets

(1.75%)

Debt/Equity

2.30

Cost of Debt

4.77%

ROA - CD

(6.51%)

Return on Equity

(16.71%)

Case 3: Lower Cost of Debt 20%

Return on Assets

(1.75%)

Debt/Equity

1.92

Cost of Debt

3.81%

ROA - CD

(5.56%)

Return on Equity

(12.39%)

Highlighted items denote changed inputs

** In this model, ROA =

Asset Income
Ave. Total Assets

Your Private Broker.

REGINA-NERI ISOQUANT MODEL

Leverage vs. Profitability

Financial Performance

Return on Equity

30%
25%

BLOOM

20%

RWM

2013

In terms of risks, we consider the company to

be less risky for 2016 as compared in 2015 as
they have now implemented measures to
reduce bad debt provisions.
Company has preference to be financed
through debt as it indicated a debt-to-equity
ratio of 69.2%
With strong pullbacks in income due to industry
conditions, Companys ROE went back to red
figures.
Gridlines represent the 3-year Asset to Equity
5.0 and ROE average of the PSEi.

IV

2014

15%

2014
2012
2015

10%
5%

II

0%
-5% -

1.0

2.0

3.0

4.0

2012

-10%

III

2016E

2013

-15%

Legend:

2015

-20%

I - Higher Returns,
Higher Financial Risk

IV - Higher Returns,
Lower Financial Risk

II - Lower Returns,
Lower Financial Risk

III - Lower Returns,

Higher Financial Risk

Asset to Equity

Valuation Isoquants

Perception vs. Profitability

20%

Return on Equity

2016E

0%
-5
-5%

2013

2016E15

Isoquant lines (1,3,5,7) represent Price to Book

3
2
1

35

values, while gridlines represent the average

P/E and ROE of companies in the PSEi in the
last 3 years.

55

2015E

II

2016E -10%
-15%

P/E of the company is at the negative due to

losses incurred. If management has properly
implemented their target objectives, we can see
BLOOM to have green figures for 2016.

2013

5%

-25

IV

2014

2015

15%
10%

2014

III

2015

I Undervalued
II Fairly valued

IV Fairly valued

BLOOM

-20%

III - Overpriced

RWM
Price Earnings

Operating Isoquants

Efficiency vs. Profitability

25.0%

2014

20.0%

2014

BLOOM

RWM

15.0%

2015

Profit Margin

10.0%

2013

8
5
3

5.0%
0.0%
-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Operating margins of the company yielded

positive results however higher depreciation
expense and interest expense due to the
completion of Sky Tower phases led to lower
net income of the company.
Non-gaming segments are beginning to register
double digit growth but is still not enough to
augment rather flat growth on the gaming
segment.
Isoquant lines (1%, 3%, 9% and 13%) represent
Return on Assets.

-5.0%

2016E
-10.0%

2013
-15.0%

2015

-20.0%

Page 4 of 7

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TECHNICAL ANALYSIS

Daily chart as of April 26, 2016

Most gaming firms have been an underperformer vs.
the PSEi
As shown in the charts, we have noticed smaller
uptrend patterns every time quarterly results are about
to be released.
RSI is at 40 forming a slight downtrend bias
MACD is trading below both the average and the zero
line, an indication of a bearish movement
If this downtrend continues on, we can see initial
support at P4.00, strong support at P3.10 while
resistance is at P5.20
Momentum will increase as 1Q16 earnings results
approaches, but not as volatile as other stocks like
MCP.
BUY on pullbacks.

Page 5 of 7

BLOOM vs. PSEi, MCP, RWM, PLC, LR

Source: www.bloomberg.com

Your Private Broker.

GLOSSARY

Expected Performance

Recommendation Guide

within 1 year

BUY

The stock is a bargain relative to the PSEi or its peers; the stock has significant
long-term upside

Projected Gain > 10%

HOLD

Neutral; the companys fundamentals are good, but interested buyers should
wait and consider buying other stocks with better upside.

+/- 10%

SELL

Take profits or cut losses; the stock does not have much upside so investors
should close their position and look for bargains.

Projected Loss > 10%

Financial Ratios
Return on Equity

Shows how much profit a company generates with the money its shareholders have invested.

Earnings per share

The portion of a companys profits allocated to each outstanding share of common stock.

Profit Margin

Measures how much earnings a company actually keeps after expenses.

Asset Turnover

The amount of sales generated for every peso of assets

Return on Assets

Reflects a companys efficiency at using its assets to generate earnings.

Asset to Equity

Shows the companys financial leverage. It is an indicator of the overall financial stability of a company.
An indicator of a firms financial stability; It calculates the odds that a company will become bankrupt.

Altmans Z-Score

If: Z > 3.0, Safe Zone;

1.80 < Z < 3.0, Grey Zone;

Z < 1.80, Distress Zone (high likelihood of bankruptcy)

Price to Earnings

Reflects how much investors are willing to pay per dollar of earnings.

Price to Book

Reflects how many times book value investors are willing to pay for a share of the company.

Graham Multiplier

P/E Ratio x P/B Ratio; Benjamin Graham prefers companies that have a Graham Multiplier below 22.5

Book Value per share

A per share estimation of the minimum value of a companys equity.

Dividend Yield

Shows how much a company pays out in dividends relative to its share price.

Technical Analysis Term/s

Fibonacci Retracement

Potential retracement of a securitys original move in price. It uses horizontal lines to indicate key areas
of support or resistance (23.6%, 38.2%, 50%, 61.8% and 100%).

Limlingan Model: ROE = ROA + D/E * (ROA CD)

Basic Assumptions:
ROE = Return on Equity
ROA = Return on Assets*
D/E = Debt to Equity
CD = Cost of Debt
If ROA > CD, then ROE > ROA
If ROA < CD, then ROE < ROA

*using Asset Income

Can be used to undertake the following

financial analyses:
Pinpoint areas of weak and strong financial
management
Answers what if in terms of the impact of
the ROE
Prepare financial plans which start with the
ROE targets and end with specific, financial
targets such as maintaining operating
expenses and leverage
Better assign areas of responsibilities to
financial officers
Create equity centers where general
managers have both asset and debt
management responsibilities

CEO
Maximize ROE for its shareholders

COO

CFO

Improve ROE
through operational
efficiency or ROA

Improve ROE by
maximizing debt
(reduce leverage
or cost of debt)

Disclaimer: The material contained in this publication is for information purposes only. It is not to be reproduced or copied or made available to
others. Under no circumstances it is to be considered as an offer to sell or a solicitation to buy any security. While the information herein is from
sources we believe reliable, we do not represent that it is accurate or complete and it should not be relied upon as such. In addition, we shall not be
responsible for amending, correcting or updating any information or opinions contained herein. Some of the views expressed in this report are not
necessarily opinions of Regina Capital Development Corporation.

Page 6 of 7

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CONTACT US

HEAD OFFICE
Suite 806, Tower I, PSE Plaza
Ayala Ave., Ayala Triangle,
Makati City, Metro Manila
Backroom(+63) 2 848 5482 to 84
Fax
(+63) 2 848 5482
Trading Floor (+63) 2 891 9413 to 17
Available from 9:30 am to 12:00 pm, and 1:30 to 3:30 pm only.
www.reginacapital.com
rcdc@reginacapital.com

LOCATIONS WITHIN METRO MANILA

GREENHILLS
PASIG
512-B Tower 2 Lee Gardens
Condominium, Lee St. cor. Shaw
Blvd., Mandaluyong City

Unit 1242 Megaplaza Building,

ADB Ave. cor. Garnet St.,
Ortigas Center, Pasig City

(+63) 2 584 0951 and 661 6508

(+63) 2 584 0951

Giok Hon Gotua, Branch Head

ggotua@reginacapital.com

Manuel Luis Zialcita, Branch Head

mzialcita@reginacapital.com

OUTSIDE METRO MANILA

ILOILO

CAGAYAN DE ORO

BAGUIO

2F B&C Square Bldg., Iznart St.,

Iloilo City

GF Wadhus Bldg., JR Borja St.,

Cagayan de Oro City

Unit 701 Jose De Leon Center,

Session Rd., Baguio City

(+63) 33 336 8140

(+63) 8822 721 617

(+63) 74 446 9338

Joseph Kuan Ken, Branch Head

Iloilo@reginacapital.com

Romero Geroy, Jr., Branch Head

cdo@reginacapital.com

Rowena Tabanda, Branch Head

baguio@reginacapital.com

Page 7 of 7

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