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Duterte vows no new casinos, as Chinese investors push on

Philippine president says he 'hates gambling,' putting Galaxy and Landing plans at risk

MANILA/HONG KONG -- Deepening a faceoff with Chinese investors, Philippine President Rodrigo Duterte said on Wednesday that he will not permit the opening of new casinos in his country.

Duterte's comments came as the vice chairman of Macau casino operator Galaxy Entertainment Group said his company's dispute with the government over its plans to develop a gambling resort on the island of Boracay was just a "misunderstanding."

The president's speech at the national police headquarters also came a day after he disrupted the groundbreaking ceremony for another Hong Kong-listed company's $1.5 billion casino resort on Manila Bay by firing the management and board of directors of the Philippine foundation that owns the site

Referring again to the project by Landing International Development on Wednesday, Duterte said, "You don't give gambling license franchises for 75 years."

"I will not allow it," he said. "I hate gambling, I do not want it. There will be no casinos outside of what is existing. I'm not granting anything."

The president and casino regulator Philippine Amusement and Gaming (Pagcor) have this year repeatedly made conflicting statements about the status of casino projects in the country. Among the largest projects underway is a casino resort near Landing International's site that is being developed by a joint venture between local company Alliance Global Group and Malaysia's Genting.

The policy gap originally opened up in late March when Duterte suddenly said he would not allow any casinos to open on Boracay, a few days after Pagcor had issued a provisional license to Galaxy and local partner Leisure and Resorts World. Adding to the confusion, Duterte announced the island would be closed to tourism for six months for an environmental cleanup.

Until now, Galaxy officials had said little about the dispute. However on Wednesday, Deputy Chairman Francis Lui Yiu-tung said, "It might be a misunderstanding that the project is now on hold."

Speaking at a news conference in Hong Kong to announce the company's first-half results, he added: "I am confident that our vision and the vision of the Philippine government are compatible. We think that the project can proceed. We plan to invest there."

Lui, who put the value of the project at $300 million to $500 million, said it would include only 50 to 60 gaming tables and be a low-density development compatible with its area, expressing support for the government's environmental cleanup.

"Boracay is a beautiful place," he said. "It is a destination many of our clients like. We want to build Boracay to be another Maldives."

Late Tuesday evening, Landing International said in a stock exchange notice that it had not received any official notice about the government suspending its project or reviewing its lease for its site.

While a presidential spokesman had called the lease "grossly disadvantageous" to the government, Landing International said the agreement had been reviewed by the Office of the Government Corporate Counsel of the Philippines and that it still considered it to be "legal, valid and enforceable."

Landing International said it is to pay 34.46 million pesos ($652,000) a month in rent, and share 10% of after-tax profits from theme park operations with the owning foundation. Landing International's stock fell 5.8% on Wednesday to HK$5.98.

Regarding Duterte's concerns about a "75-year" agreement, Landing International said the lease term is 25 years, renewable for another 25 years. Pagcor officials say that the lease was originally to run for 50 years with a 25-year renewal option but that it was changed after state auditors objected.

Meanwhile, Bloomberry Resorts, which operates the Solaire casino on Manila Bay and one in South Korea, reported Wednesday that its net income had risen 29.3% to 5.31 billion pesos for the first half of the year as total revenues rose 20% to 22.13 billion pesos. Bloomberry shares dipped 0.8% to 10.10 pesos.

For Galaxy, although officials expressed optimism about their chances of proceeding with casino projects in both the Philippines and Japan, they affirmed that Macau will remain their priority.

"We still believe Macau continues to represent the best medium- and long-term investment potential in the world," said Group Chief Financial Officer Robert Drake, noting the company plans to invest more than 45 billion Hong Kong dollars ($5.73 billion) on further Macau developments.

Galaxy, like Macau's other five casino operators, posted a healthy gain in revenue and profit for the first half of the year. Bets at both its public and high-roller tables rose strongly, sending revenues up 24.5% from a year earlier to HK$28.06 billion. Net profits increased even faster, up 55.6% to HK$7.21 billion.

Galaxy's shares rose 4.5% to HK$59.75 in Hong Kong on Wednesday. Overall, monthly Macau gaming revenues have now risen year-on-year for two years, with this year's total through July reaching 175.54 billion patacas ($21.71 billion).

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