The first full week of the New Year began with analysts once again anticipating a decline in Macau gross gaming revenues for 2015. In one other development, Rolling Chip Turnover at Iao Kun Group Holding Company Ltd. (IKGH) declined for the third consecutive month in December and also missed its own annual expectation.
However, this pessimism was somewhat offset as Wynn Resorts Ltd. (WYNN) inched closer to building a $1.6 billion casino resort on the Everett waterfront. Also, Caesars Entertainment Corp. (CZR) received support from bondholders to enable the casino operator’s largest unit Caesars Entertainment Operating Company, Inc. (CEOC) to reorganize its bankruptcy. (Read last development: Gambling Stock Round Up for Jan 5, 2014).
Recap of the Week’s Important Stories:
1. With Macau gaming revenues recording the highest decline in Dec 2014 and also the first annual decline since 2001, analysts expect the same to decline in 2015 as well. A Deutsche Bank analyst expects revenue to decline 8% compared to the previous expectation of flat numbers. Particularly, the analyst expects revenues to fall 21% year over year in the first half of 2015, before posting positive growth of 7% in the second half of the year.
The slump reflects a slowdown in Macau as a result of high-stake gamblers curtailing spending amid a cooling Chinese economy. Also, the nationwide crackdown on corruption in China has compelled Macau officials to impose restrictions on high rollers in order to stop billions of dollars from being siphoned off illegally from mainland China to Macau. Meanwhile, political unrest, a smoking ban on mass market gaming floors and pro-democracy demonstrations in Hong Kong have compounded woes.
2. Wynn Resorts has managed to cross a big hurdle in its way to build a $1.6 billion resort casino on the Everett waterfront. Recently, this leading casino operator completed the acquisition of 33 acres of waterfront land (situated on the Mystic River in Everett) for $35 million where it intends to build the resort. The acquisition of this site formerly known as the Monsanto chemical plant site gives the company full control over the property, thereby allowing it to execute its long-awaited Massachusetts casino plan. (Read: Wynn Resorts Gets Closer to Massachusetts Casino Plan)
3. Iao Kun Group Holding Company posted weak Rolling Chip Turnover for the month of December. Turnover of $0.71 billion plunged 48% year over year, marking the third consecutive monthly decline. Moreover, the rate of decline was higher than declines of 27% and 30% in Oct and Nov 2014, respectively. IKGH’s Rolling Chip Turnover for 2014 was $16.60 billion, down 3% year over year. Also, it was below the company’s expected range of $16.80 billion to $17.5 billion.
The downside reflects slower revenue growth of VIP baccarat in addition to economic downturn and tightening of credit in mainland China, where the majority of the company’s VIP gaming patrons reside. (Read: Iao Kun Group's Rolling Chip Turnover Plunges in December)
4. In one other development, Caesars Entertainment and its subsidiary Caesars Entertainment Operating Company, Inc. (CEOC) declared that holders of more than 60% claims with respect to CEOC's 11.25% senior secured notes due 2017, CEOC's 8.5% senior secured notes due 2020 and CEOC's 9% senior secured notes due 2020 have signed the Amended and Restated Restructuring Support and Forbearance Agreement dated Dec 31, 2014. Caesars Entertainment’s restructuring plan therefore now has enough support to enable the casino operator’s largest unit to reorganize bankruptcy.
Per the plan, the operating unit will reportedly file for bankruptcy by Jan 20, 2015 and will be split into two companies, one that will run 44 casinos in 13 states and the other a property company. Of late, the company has been negotiating with its creditors on a reorganization plan that would put CEOC into Chapter 11 bankruptcy protection.
Performance
The first week of the year remained quite subdued in terms of share price. Share prices of some of the companies declined over the last five trading sessions with the highest decline of 10.4% recorded by Caesars Entertainment. It was followed by Caesars Acquisition Company (CACQ) which declined 2.6%. However, share price of Wynn Resorts, Melco Crown Entertainment Ltd. (MPEL) and Boyd Gaming Corp. (BYD) gained last week.
Over the last six months, share price of most of the gambling stocks lost value with Melco Crown witnessing the maximum decline of 27.8%, followed by a decline of 26.2% recorded by Wynn Resorts. However, share price of Boyd Gaming gained 7.2% over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
1.5% |
-26.2% |
|
LVS |
-2.1% |
-26.1% |
|
MGM |
-2.4% |
-21.1% |
|
MPEL |
1.08% |
-27.8% |
|
CACQ |
-2.6% |
-19.4% |
|
BYD |
1.4% |
7.2% |
|
CZR |
-10.4% |
-20.3% |
What’s Next in the Gambling World?
Century Casinos, Inc. (CNTY) will attend Sidoti & Co.'s Emerging Growth Institutional Investor Forum in New York today. It will also attend 15th annual "New Ideas for the New Year" CJS Securities Investor Conference in New York on Jan 14, 2015.
Since no other major development is expected next week, the performance of gambling stocks is not expected to change significantly.
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