Shares of Las Vegas Sands Corp. (LVS) nosedived to a 52-week low of $58.91 on Oct 13 owing to the slowdown in Macau over the past three four months which is taking a toll on gambling companies. In fact, the share price of the company has declined a substantial 25% since the beginning of May 2014.
Why the Decline?
The ongoing weakness in Macau is expected to impact Las Vegas Sands’ third-quarter results since Macau gross gaming revenue declined in all three months of the quarter.
This slump can be attributed to government’s crackdown on corruption by enforcing laws to prevent VIP gamblers from illegally siphoning off billions of dollars from mainland China to Macau. This has significantly affected footfall at the casinos. Meanwhile, limitations like the one on the use of state-backed payment processor UnionPay is making it harder for players to obtain cash to gamble. Since the new restrictions on UnionPay machines and visa restrictions came into effect, VIP customers have become more cautious and have started avoiding Macau which has affected its revenues.
Moreover, credit growth concerns, tighter restrictions on visas and the current protests in Hong Kong are posing considerable threats to Macau’s gaming revenues, which have raised concerns for gambling companies. This Zacks Rank #3 (Hold) that has a negative Earnings ESP of 2.38% is expected to post third-quarter results on Oct 15, 2014 after the market close.
The share price plunge also reflects media reports that suggest that the worst is not over yet. With apprehensions of more trouble in the future, a few analysts expect a steeper revenue decline in the month of October. The concerns also breed from the Chinese government’s recent restriction on the issue of group tour visas to Hong Kong because of the ongoing protests and also the recent implementation of a ban on smoking in casinos.
Other companies like Wynn Resorts Ltd. (WYNN), MGM Resorts International (MGM) and Melco Crown Entertainment Limited (MPEL) also earn a better part of their revenues from Macau and are therefore bearing the brunt of the economic instability plaguing the region.
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