Companies in the gambling industry seem to be targeting portfolio expansion in order to survive a challenging environment. Both MGM Resorts International MGM and Penn National Gaming Inc. PENN moved ahead with their casino resorts in Massachusetts.
Century Casinos Inc. CNTY has a majority stake in the United Horsemen of Alberta Inc. – the developer of Century Downs Racetrack and Casino. Century also renewed its two-year consulting agreement with subsidiaries of Norwegian Cruise Line Holdings Ltd. NCLH, thereby entitling itself to a certain fee.
In another development, Penn National Gaming decided not to support the Lawrence Downs Casino and Racing Resort project, owing to a soft economy. Also, the delay in the bill to legalize gambling in Japan came as a blow for casino operators like Melco Crown Entertainment Ltd. MPEL, Las Vegas Sands Corp. LVS and MGM Resorts.
Meanwhile, Caesars Entertainment Corp. CZR continues to proceed with the bankruptcy case of its subsidiary Caesars Entertainment Operating Company (CEOC). (Read last development: Gambling Stock Round Up for Mar 23, 2015)
Recap of the Week’s Important Stories:
1. Efforts to legalize gambling in Japan have once again reportedly come to a standstill after the proponents announced that they would delay the bill to legalize gambling at “integrated resorts” in the country. Recently, pro-casino lawmakers had stated that they would re-submit the already-failed bill by Mar 31, 2015. However, per media reports, they changed their plan as all the parties in Prime Minister Shinzo Abe's coalition did not agree to it on concerns over gambling addiction and other social ills.
This delay would thwart plans of casino operators to establish their presence in a market which has the potential to become the third largest gaming destination after Macau and the United States, with an expected annual turnover of more than $40.0 billion. Nevertheless, the bill will reportedly be submitted in early April.
2. MGM Resorts broke ground for MGM Springfield, thus marking the beginning of construction of this $800.0 million casino resort. After two years of hearings and background investigations, MGM Resorts received first approval of a casino license from the Massachusetts Gaming Commission to operate a mixed-use development in Springfield, the Commonwealth of Massachusetts in Jun 2014. (Read More: MGM Resorts Gets Approval for Springfield Casino)
The 25-story casino resort that is scheduled to open by the end of 2017 features a 250-room hotel, spa, pool and 125,000 square feet of gaming space: 3,000 slot machines, 75 gaming tables, a poker room and high limit VIP gambling area. It has a retail and restaurant space that will accommodate 15 shops and restaurants and is spread over an area of 55,000 square feet. The resort is expected to create 3,000 permanent jobs and 2,000 construction jobs to Springfield.
3. Penn National Gaming has backed out from the proposed Lawrence Downs Casino and Racing Resort project. Endeka Entertainment LP had offered the proposal to Pennsylvania Gaming Control Board for this $225.0 million casino project in May 2013. However, the company refused to work on the integrated racing and gaming facility owing to the continued softness in the economy and competition.
In one other development, Penn National Gaming announced that its Plainridge Park Casino is set to open on Jun 24, 2015, subject to final regulatory approval by the Massachusetts Gaming Commission. The opening of this casino resort would bring the top dining, gaming and entertainment brands to the region.
Located near the south I-495 and I-95 interchange, Plainridge Park Casino will feature nine dining and entertainment venues. The 106,000 square foot space will also include a multi-purpose banquet room, live harness racing and more than 1,200 slot machines and electronic table games and approximately 1,800 structured and surface parking spaces. The casino resorts will operate 24×7.
4. Last week, Century Casinos announced that it now owns 75% of United Horsemen of Alberta Inc. – the company that is developing the Century Downs Racetrack and Casino north of Calgary. Per an amended credit agreement in connection with the development of the Century Downs project, Century Casinos had agreed to provide CA$24 million in two separate loans to United Horsemen of Alberta.
The first loan of CA$13 million secured Century Casinos with a 60% stake in the developer while now the other $11.0 million has given the company an additional 15% stake. The Racing Entertainment Center of the project, including a casino with 550 gaming machines, is scheduled to open on Apr 1, 2015.
In one other development, effective Jun 1, 2015, Century Casinos and Oceania Cruises, Inc. and Seven Seas Cruises S. DE R.L. mutually agreed to terminate the casino concession agreements. Oceania Cruises, Inc. and Seven Seas Cruises S. DE R.L are subsidiaries of Norwegian Cruise Line Holdings. Owing to the early termination, Century Casinos will receive $4.0 million.
Meanwhile, effective Jun 1, per a new two-year consulting agreement, the company will provide limited consulting services for the shipboard casinos of Oceania Cruises and Seven Seas Cruises. Century will be paid a consulting fee of $2.0 million.
5. In one other development, Richard Davis was reportedly appointed as an examiner by the bankruptcy judge in the Caesars Entertainment Operating Company (CEOC) bankruptcy case. Davis had served Weil, Gotshal & Manges LL for 32 years up to 2012. Prior to that, he had served as an assistant secretary of the U.S. Treasury from 1977 to 1981. He was also a part of the Watergate special-prosecution force.
Caesars Entertainment had voluntarily filed for reorganization under Chapter 11 of the United States Bankruptcy Code in Jan 2015. (Read: Caesars Entertainment's Subsidiary Files Bankruptcy)
Share Price Performance
Share prices of most of the companies fell over the last five trading sessions with the highest decline of 7.8% recorded by Caesars Acquisition Company, followed by Melco Crown that fell 5.3%. Nevertheless, share price of Caesars Entertainment Corporation gained 1.4% over the same time frame.
Over the last six months, share prices of most gambling stocks lost value, with Wynn Resorts WYNN experiencing a decline of 29.1%, followed by Caesars Acquisition Company that plunged 24.6%. However, Boyd Gaming Corp. BYD gained 41.2% over the same timeframe.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
-1.6% |
-29.1% |
|
LVS |
-0.7% |
-8.6% |
|
MGM |
-3.7% |
-3.1% |
|
MPEL |
-5.3% |
-12.3% |
|
CACQ |
-7.8% |
-24.6% |
|
BYD |
-1.3% |
41.2% |
|
CZR |
1.4% |
-21.5% |
What’s Next in the Gambling World?
Iao Kun Group Holding Company Limited that carries a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00% is scheduled to report its fourth quarter and 2014 results on Apr 1, 2015.
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.
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