There seems to be no end to the plight of gaming companies. Last week was no different either. Macau, the only gambling destination in China, was declared to have entered a recession after the Statistics and Census Bureau announced that Gross Domestic Product for the region declined for the second consecutive quarter.
Meanwhile, Full House Resorts Inc. FLL and Century Casinos Inc. CNTY both disappointed investors with dismal fourth quarter results. After posting profits in the third quarter, Full House Resorts posted a loss in the fourth quarter. Meanwhile, Century Casinos posted a loss for the fourth consecutive quarter.
On the other hand, Land & Buildings’ activist investor Jonathan Litt’s effort to help MGM Resorts International MGM recover from its weak performance in the past few quarters remained in focus. (Read last development: Gambling Stock Round Up for Mar 9, 2015)
Recap of the Week’s Important Stories:
1. The Statistics and Census Bureau (DSEC) announced last week that Macau’s Gross Domestic Product (GDP) for the fourth quarter of 2014 plunged 17.2% year on year in real terms, owing to a significant decline in gross gaming revenues and shrinking visitor spending. This marked the second consecutive quarter of GDP decline and the highest decline since 2001 when the Statistics and Census Service began compiling data. Consequently, GDP for 2014 contracted 0.4% in real terms.
Given the scenario, analysts declared that Macau is in recession. Companies that were impacted by the release include Wynn Resorts Ltd. WYNN, MGM Resorts, Las Vegas Sands Corp. LVS and Melco Crown Entertainment Ltd. MPEL. (Read: No Respite for Casino Stocks as Macau Slump Continues)
2. Full House Resorts posted a loss of 47 cents in the fourth quarter of 2014 that compared unfavorably with the year-ago loss of 13 cents per share. Meanwhile, the company’s revenues of $26.7 million missed the consensus mark of $30.0 million by 11% and declined 13% year over year. The downside reflects a decline in revenues at the Rising Star Casino Resort, as a result of increased competition in Ohio. Adjusted EBITDA declined 83% year over year to $0.2 million. Share price of the company fell 3% in response.
Nevertheless, the company stated that it has experienced significant improvements in operating results at its casinos, Silver Slipper and Northern Nevada so far in 2015.
3. Century Casinos posted an adjusted loss of 1 cent per share in fourth quarter 2014 that compared unfavorably with the Zacks Consensus Estimate of earnings of 4 cents. This marked the fourth consecutive miss. However, the bottom line remained flat year over year. The loss reflects higher interest expenses and total operating costs and expenses.
Though net revenue of $31.2 million went up 6.2% year over year, it missed the Zacks Consensus Estimate of $32 million by 2.5%. Increase in revenues at Century Casino, Calgary, Casinos Poland and Cruise Ships & Other was partially offset by a decline in revenues at Century Downs Racetrack and Casino and Century Casino & Hotel, Central City. Adjusted EBITDA of $3.98 million was up 82% year over year, owing to an increase in revenues.
4. In one other development, MGM Resorts rejected the nominees suggested by hedge-fund, Land & Buildings’ activist investor Jonathan Litt for the board. Litt had recently urged this leading casino operator to convert its real estate assets into a real estate investment trust (REIT) and spin off its lodging and entertainment business that would manage its U.S. assets and lease from the REIT. The investor had then announced its plans to nominate four directors to the board of MGM Resorts including himself. (Read: MGM Resorts Rises 10.6% on Investor Call for REIT Split)
Land and Buildings stated that it is disappointed by MGM Resorts’ decision and believes that it gives a clear signal that the board would not prefer to work collaboratively to reach a solution.
Share Price Performance
Share prices of most of the companies increased over the last five trading sessions with the highest increase of 16.5% recorded by MGM Resorts. However, this sudden increase cannot be regarded as a turnaround. With the situation worsening in Macau – a key operating region for companies like Wynn Resorts, MGM Resorts, Las Vegas Sands and Melco Crown — we believe that the improvement could be temporary and therefore prefer to wait for more substantial and consistent improvement in share prices. Nevertheless, share price of Boyd Gaming Corp. BYD and Caesars Entertainment Corp. both fell 1.2% last week.
Over the last six months, share price of most of the gambling stocks lost value with Caesars Acquisition Company and Caesars Entertainment both experiencing a decline of 32.7%, followed by Wynn Resorts that plunged 29.8%. However, Boyd Gaming gained 33.2% over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
2.3% |
-29.8% |
|
LVS |
8.3% |
-15.2% |
|
MGM |
16.5% |
-16.1% |
|
MPEL |
7.5% |
-20.5% |
|
CACQ |
1.3% |
-32.7% |
|
BYD |
-1.2% |
33.2% |
|
CZR |
-1.2% |
-32.7% |
What’s Next in the Gambling World?
MGM Resorts and MGM China Holdings Limited will present at the Credit Suisse Asian Investment Conference in Hong Kong today.
We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatile movement to continue in the coming days as well.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment