‘Impact of POGO ban on listed firms is minimal’

MANILA, Philippines — The effect of President Marcos’ order to ban Philippine offshore gaming operators (POGOs) is seen bearable for listed property companies and the stock market, with its impact likely be felt mostly on the local jobs generated by the industry.

China Bank Capital Corp. managing director Juan Paolo Colet said the POGO ban would not have a significant adverse effect on the overall stock market, noting that its near-term impact will be most felt in the property sector.

“It’s important to remember that all the major real estate players have already limited their exposure to POGOs, so any loss in lease income should not materially affect their earnings outlook or long-term prospects,” Colet said.

COL Financial indicated that while some listed companies still have POGO operations, their exposure to POGOs has significantly decreased since its peak in 2019.

According to COL Financial, the direct impact of the POGO ban on listed companies is limited.

COL Financial said the direct impact on listed companies is now minimal compared to 2019 when the exposure of Megaworld Corp. reached 10 percent and Filinvest Land Inc. stood at 15 percent.

Further, it said property companies’ current valuations suggest any downside reaction would be limited.

“POGO ban to have limited impact on property companies since their exposure is small, although industry wide vacancy rates could increase pressuring rental rates,” COL Financial Research head April Tan said in a social media post.

“Nevertheless, any negative impact is already priced in given depressed valuation of property stocks,” she said.

Philstocks Financial assistant research manager Claire Alviar said the decline in the property sector during yesterday’s trading session was anticipated in reaction to the recent POGO ban.

The property sector shed by 1.62 percent yesterday with industry giants such as SM Prime and Megaworld dropping by 2.45 percent and 1.6 percent, respectively.

DoubleDragon Corp. and DDMP REIT, which reportedly have bigger exposures to POGO, plunged by 5.2 percent and 5.17 percent, respectively.

“In terms of impact to the general market, we think that this could be a knee-jerk reaction and bargain hunting is anticipated especially to property firms with low exposure to POGOs,” Alviar said.

“On the upside, we think that most companies have already reduced their exposure to POGOs compared to the previous years due to the issues surrounding POGOs. In fact, according to SM Prime investor relations, their company no longer has any POGO office exposure. Other companies only have below five percent exposure,” she said.

However, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the ban on POGO would have adverse impact in terms of reduced employment for locals in POGO operations, reduced demand for real estate rentals and leases for residential, office and commercial properties and even purchases of residential condo.

Ricafort said it would also reduce demand for retailers and other commercial establishments.

“Suppliers or any other businesses or industries in the supply chain of POGOs could be adversely affected such as rental or lease income, employment agencies and other related products and services needed by POGOs from the locals,” Ricafort said.

“Transport and logistics servicing POGOs could also be adversely affected in terms of reduced or lost business,” he said.

Moving forward, Colet said there is a need to see how the property market would absorb the additional supply of office spaces and residential units from POGO tenants and landlords.

“A potential glut could put downward pressure on real estate rents and prices in certain locations with high POGO exposure,” he said.

Nonetheless, COL Financial said the ban is a positive development as it resolves a longstanding issue for the industry since its inception in 2018.