With China’s anti-corruption drive weighing on Macau’s economic prospects, the gambling companies operating in the region have not seen meaningful growth lately. Not surprisingly, gross gaming revenues in Macau declined significantly in September – marking the fourth consecutive month of decline. Additionally, the casino worker strike in Macau has dealt another heavy blow.
However, the companies operating in the region are busy coping up and doing their best to mitigate the troubles plaguing the economy. On the one hand, MGM Resorts International (MGM) has taken a step forward and has arranged finance for its Las Vegas Arena, and on the other hand, the company is set to open an Italian restaurant at its Bellagio resort. (Read last to last week’s development: Gambling Stock Round Up for Sep 29, 2014)
Recap of the Week’s Important Stories:
1. Gaming Inspection and Coordination Bureau declared a 11.7% year-over-year fall in gross gaming revenues in the month of September to $3.2 billion. This marks the fourth monthly drop in a row and the steepest decline since Jun 2009. However, the decline was in line with analysts’ expectation of a 12–13% fall.
The substantial fall reflects the restrictions imposed by the Chinese government to stop illegal money transfers from mainland China to Macau casinos. The government’s crackdown on corruption, which includes restrictions on VIP gamblers to stop billions of dollars from being siphoned off illegally from mainland China to Macau, has affected footfall at the casinos and thereby revenues.
Moreover, a slump in the Chinese economy has restricted consumer spending. Per media reports, protests in Hong Kong would have also compelled mainland Chinese to postpone their Hong Kong-Macau trips, thereby lowering guest traffic.
2. Macau, the only place in China where gambling is legal, is reportedly facing labor unrest. Last week, a large number of casino workers in Macau went on a strike to demand higher wages and better benefits. This is likely to worsen the situation in Macau that is already being hurt by declining revenue trend over the past few months.
3. MGM Resorts and Anschutz Entertainment Group (AEG), one of the leading sports and entertainment presenters in the world, announced settlement of a $200 million bank facility to finance the development and construction of the new Las Vegas Arena. The arena will host boxing and other sporting events, awards shows and special events.
Set to open in 2016, this $375 million indoor arena is located between New York-New York and Monte Carlo resorts. This 20,000-seat arena will also feature 50 luxury suites and other specially designed exclusive hospitality offerings. Also, the stadium is expected to host more than 100 events annually.
4. The first Italian restaurant – Lago – is slated to open in Mar 2015 at Bellagio resort, a luxury hotel and casino in Las Vegas owned by MGM Resorts. Notably, the Lago restaurant will replace the Circo eatery that was closed on Sep 30, 2014. Apart from having a fountain view, the eatery will also flaunt an outdoor patio.
5. MGM Resorts, which has been primarily sponsoring fantasy sports events, is now planning to invest in fantasy sports leagues. The company was in talks with regulators at the Global Gaming Expo Conference to ensure legal approval of such an initiative. This move comes as part of MGM Resorts’ belief that betting on sports is a growing part of the casino business. Meanwhile, fantasy sports leagues are also gaining significant popularity. The company is also willing to initiate sports betting in Las Vegas, which is not currently legal in the state.
Performance
Share prices of most of the gambling stocks declined last week. Caesars Entertainment Corp. (CZR) collapsed a significant 10.6%, followed by Melco Crown Entertainment Limited’s (MPEL) 6.4% decline. However, Las Vegas Sands Corp. (LVS) gained 0.9% over the same time frame, possibly owing to its management’s expectation of a recovery in Macau over the next two months.
Over the last six months, all gambling stocks lost value with Melco Crown and Caesars Acquisition Company (CACQ) witnessing the maximum decline of 29.5% and 28.8%, respectively.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
-1.2% |
-16% |
|
LVS |
0.9% |
-23% |
|
MGM |
-2% |
-14% |
|
MPEL |
-6.4% |
-29.5% |
|
CACQ |
-4.8% |
-28.8% |
|
BYD |
-0.3% |
-18.2% |
|
CZR |
-10.6% |
-27.7% |
What’s Next in the Gambling World?
Since no major development is expected this week, the performance of gambling stocks is not likely to change much. 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 >>
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