Phumelela Mulling Entry into SA Casino Market

phumelelaThe country’s major gaming and betting operator, Phumelela is weighing its options regarding its entry into South Africa’s casino market. The group is eyeing, in particular, the option of acquiring smaller casinos that may be released onto the market with the takeover of Peermont by Sun International. Analysts believe that a number of casinos will be put up for sale after the merger is complete.

Phumelela’s brand is primarily focused on tote betting and fixed odds sports betting, and tote betting for horse racing. But the group’s chief executive officer, Rian du Plessis said this week that his group was aware of the possibility to enter the land casino market due to the Peermont-Sun International deal, and would consider all its options.

“We would certainly look at such opportunities… but very carefully,” he said.

One thing that could hamper any advancement in these potential plans is the fact that the government may start awarding new licenses for LPMs (limited payout machines). According to du Plessis, this could impact the profitability of smaller casinos.

“These LPMs are effectively mini-casinos,” he said. “Smaller casinos could be harder hit by these LPM operations (mostly locate in pubs and diners), which will be located closer to customers’ homes.”

Although the government has not yet confirmed when it will start issuing these licenses, Phumelela said that it would be entering into the application process and would be pursing them.

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Du Plessis pointed out that gaming bodies have recommended that racecourses would be ideal venues for the new LPM licenses being issued by the government.

LPM machines – and their profitability potential – are no strangers to Phumelela’s operations, with the group recently showing that profits from LMP machines in its retail outlets grew to R11 million – a growth of over 20%.

The group’s interim report also showed that income from net tote betting climbed to R116 million (up 24%). A huge 200% growth to R17 million was seen in net fixed odds betting income on sports (excluding horse racing).

In less than two years, the number of retail outlets of Phumelela’s Betting World brand has grown by 50% and there are now 60 such outlets spread around South Africa.

The only area that continues to show losses is Phumela’s horse racing business.

Du Plessis predicted that Phumelela would be branching into more international markets, explaining that profit from its existing operations abroad had grown by 24%.