Iao Kun Group Holding Company Limited (IKGH) posted weak Rolling Chip Turnover for the month of December. Rolling Chip Turnover is used by casinos to measure the volume of VIP business transacted and represents the aggregate amount of non-negotiable chips players purchase. Iao Kun Group’s Rolling Chip Turnover of $0.71 billion plunged 48% year over year, marking the third consecutive monthly decline. Moreover, the rate of decline was higher than declines of 27% and 30% in Oct and Nov 2014, respectively. Win rate for the month of Dec 2014 was 4.56%.
IKGH’s Rolling Chip Turnover for 2014 was $16.60 billion, down 3% year over year. Also, it was below the company’s expected range of $16.80 billion to $17.5 billion.
The downside reflects slower revenue growth of VIP baccarat in addition to economic downturn and tightening of credit in mainland China, where the majority of the company’s VIP gaming patrons reside.
In addition, Iao Kun Group, which is engaged in the promotion of five major luxury VIP gaming facilities in Macau exposes it to the sluggish economic conditions in the region. VIP gamblers in Macau are curtailing expenditures due to a cooling Chinese economy. Also, the slowdown can be attributed to a nationwide crackdown on corruption in China that has compelled Macau officials to impose restrictions on VIP gamblers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.
Owing to the downside, the company has been posting weak earnings over the past two quarters. Unfortunately, an improvement is not expected in the near-term too. Iao Kun Group Holding Company presently has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the same industry include Isle of Capri Casinos, Inc. (ISLE) and Penn National Gaming Inc. (PENN). While Isle of Capri Casinos sports a Zacks Rank #1 (Strong Buy), Penn National Gaming carries a Zacks Rank #2 (Buy). One may also consider Carnival Corp. (CCL) from the wider consumer discretionary sector with a Zacks Rank #2.
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