The last week of August was a mixed bag for the gambling industry. After posting profits for two consecutive quarters, Iao Kun Group Holding Company Limited IKGH posted a loss for second quarter 2015 as revenues and Rolling Chip Turnover declined year over year. Revenues at Nevada declined for the month of July marking the second consecutive decline. However, the decline moderated compared to the previous quarter.
In one other development, Monarch Casino & Resort Inc. MCRI opened Monarch Casino Black Hawk after renovation. Meanwhile, Caesars Entertainment Corporation CZR reportedly agreed to settle criminal and civil charges worth $20.0 million that gave a 12% boost to its share price in a day.
Meanwhile, Wynn Resorts Ltd. WYNN received some encouraging news after its casino in Boston got a long-awaited environmental permit. (Read earlier development: Gambling Stock Round Up for Aug 24, 2015).
Recap of the Week’s Important Stories:
1. Iao Kun Group Holding posted loss per share of 3 cents in the second quarter of 2015 that compared favorably with the year-ago loss of 12 cents. The results reflect lower commission to junket agents and lower selling, general and administrative expenses.
Iao Kun Group Holding is engaged in the promotion of five major luxury VIP gaming facilities in Macau. Not surprisingly, net revenue of $21.9 million declined 56% year over year due to lower rolling chip turnover during the quarter and a decreasing trend at VIP baccarat due to the ongoing anti-corruption campaign in Macau.
Rolling Chip Turnover was $1.7 billion, down 63% year over year. The company lowered its Rolling Chip Turnover guidance for 2015 for the second consecutive quarter in a row and expects it in the range of $6 billion to $7 billion compared with the previous expectation of $7 billion to $8.5 billion.
2. Nevada gaming revenues for the month of July were approximately $923.0 million, down approximately 1% year over year, per the Gaming Control Board. Revenues at the Las Vegas Strip that accounts for more than half of Nevada’s total revenue fell approximately 2.1% due to a decline in baccarat revenues. Baccarat – a lucrative but volatile card game, which is often a big reason behind swinging casino fortunes – fell 23%. The highest decline of 11% was experienced at Boulder City.
3. After completing the redesigning and renovation of Monarch Casino Black Hawk, Monarch Casino & Resort conducted the grand opening celebration of Monarch Casino Black Hawk this weekend. The company had acquired Riviera Black Hawk Casino in 2012 and renamed it as Monarch Casino Black Hawk in 2013.
As part of the existing facility redesign, the company began a three-phase upgrade of the casino in early 2014. The property's slot machine count has been increased to approximately 700 units from 565 while the number of table games is up from 9 to 14. The re-designing of the casino followed the completion of a new buffet restaurant, new restrooms and a couple of other amenities.
However, work still continues on 9-story parking structure that will triple on-site parking from approximately 500 spaces to 1,500 spaces. The expansion of the new parking structure will approximately double the existing casino space and will feature a 23 story hotel tower with over 500 guest rooms and suites, a spa and roof-top swimming pool, new restaurants, bars and banquet facilities and convention/meeting rooms. The company expects to generate an attractive return on its investment by driving both hotel and gaming revenues with this casino resort.
4. Caesars Entertainment reportedly agreed to pay $20 million to settle criminal and civil charges by the Treasury and Justice Departments. The charges were leveled after the company allegedly failed to control illegal betting rings in its sports books.
5. Wynn Resorts received an important environmental permit from Massachusetts authorities that brings it closer to building the $1.7 billion casino in Everett. After two years of study, the Massachusetts Energy and Environmental Affairs stated that the company’s plan to address traffic and environmental impacts adequately and properly complies with the state Environmental Policy Act.
Share Price Performance
Last week, Wynn Resorts decline the most at 4.4%, followed by 4% decline at Melco Crown Entertainment Limited MPEL and 1.3% decline at Las Vegas Sands Corp. LVS.
The recent stock market crash in China, which is expected to hurt visits and spending in Macau, resulted in the decline. As these companies earn a better part of their revenues from Macau, their performance is likely to be impacted. Chinese visitors account for more than 60% of Macau’s traffic.
A weaker yuan would make it more expensive for Chinese gamers to place their bets. Macau and Hong Kong have reportedly become 4% and 3.4% more expensive to visit compared to the year-ago period and last month, respectively. This is expected to keep gamblers at bay, thereby lowering investors’ confidence in the stock. In fact, Wynn Resorts hit a 5-year low on Aug 27. (Read: Wynn Resorts at 5-Year Low as Macau Woes Persist). However, Caesars Entertainment shares were up 14.3% last week.
Over the last six months, share price of most of the gambling stocks lost value with Wynn Resorts experiencing the highest decline of 44.6%, followed by a decline of 23.8% at Melco Crown. However, Caesars Acquisition Company CACQ and Boyd Gaming Corporation gained over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
-4.4% |
-44.6% |
|
LVS |
-1.3% |
-14.7% |
|
MGM |
1.2% |
-4.1% |
|
MPEL |
-4% |
-23.8% |
|
CACQ |
6.1% |
1.9% |
|
BYD |
2.9% |
19.4% |
|
CZR |
14.3% |
-13.5% |
What’s Next in the Gambling World?
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.
Isle of Capri Casinos, carrying a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.00% is expected to post its fiscal first quarter 2016 results on Sep 2, 2015. Also, Macau gross gaming revenues for the month of August are expected to be released this week.
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