The last week of May remained a mixed bag for the gambling industry. Macau’s Gross Domestic Product (GDP) fell for the third consecutive quarter. Macau revenues (for the month of May) declined yet again, marking a year of decline.
However, the pessimism in the industry was somewhat mitigated by the announcement of higher Nevada gambling revenues for the month of April, after two consecutive months of decline. Meanwhile, Iao Kun Group Holding Company Ltd. IKGH posted better-than-expected first quarter 2015 results, beating the Zacks Consensus Estimate for earnings and revenues for the third consecutive quarter.
In another development, Century Casinos Inc. CNTY expanded the territory of its casinos on cruises. (Read earlier development: Gambling Stock Round Up for May 18, 2015).
Recap of the Week’s Important Stories:
1. Gross gaming revenues (GGR) for the month of May fell 37.1% on a yearly basis to approximately $2.55 billion or 20.35 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. The decline was comparatively lower than 39% decline experienced in Apr 2015 and within analysts' expectations of a decline in the range of 37% to 40%, surveyed by Bloomberg. This marked the twelfth month of consecutive decline and the ninth consecutive month of double-digit decline.
With the current decline, GGR in Macau for the first five months of 2015 has plummeted 37.1% year over year. The continuous downside reflects the nationwide crackdown on corruption in China. This has compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.
Consequently, it has lowered footfall at the local casinos. A cooling Chinese economy, tighter visa policies, political unrest and a smoking ban on mass market gaming floors have compounded woes.
2. Macau GDP fell approximately 24.5% for the first quarter of 2015, as per the Statistics and Census Bureau. This marked the third consecutive quarterly decline. In fact, per media reports, Macau’s economy is doing worse than European countries like Greece and Ukraine. The decline reflects the anti-graft campaign and a slowing economy that have kept high rollers away from the casinos.
Macau is a key operating region for leading casino companies like Wynn Resorts Ltd. WYNN, MGM Resorts International MGM, Las Vegas Sands Corp. LVS and Melco Crown Entertainment Ltd. MPEL. Macau’s gaming revenues have gone downhill since Jun 2014 due to the anti-corruption drive by the Chinese government.
3. Nevada gaming revenues for the month of April were $897.9 million, up 5.4% year over year, per the Gaming Control Board. The upside came after declines in the month of February and March. Revenues at the Las Vegas Strip that accounts for more than half of Nevada’s total revenue went up approximately 7.8% on Baccarat revenues. Baccarat – a lucrative but volatile card game, which is often a big reason behind swinging casino fortunes – grew 5.3%.
4. Iao Kun Group Holding posted earnings per share of 13 cents per share in the first quarter of 2015 that compared unfavorably with year-ago earnings of 29 cents. The significant downside reflects lower revenues. However, it beat the Zacks Consensus Estimate of 7 cents per share.
Iao Kun Group Holding is engaged in the promotion of five major luxury VIP gaming facilities in Macau. Not surprisingly, net revenue of $41.7 million declined 48% 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. However, revenues beat the Zacks Consensus Estimate of $36.0 million by 15.8%.
Rolling Chip Turnover was $2.2 billion, down 54% year over year. The company lowered its Rolling Chip Turnover guidance for 2015 and expects it in the range of $7.0 billion to $8.5 billion compared with the previous expectation of $8.5 billion to $10.0 billion.
5. Century Casinos announced the opening of three additional casinos on cruise ships, Mein Schiff 4, Star Legend and Star Breeze. Mein Schiff 4, owned by TUI Cruises — a joint venture between Royal Caribbean Cruises Ltd. RCL and German tour operator TUI — has a capacity of 2,500 passengers. Century Casinos’ state-of-the-art casino on Mein Schiff 4 features 15 slot machines as well as live and electronic gaming tables.
Meanwhile, Star Legend and Star Breeze, the newest additions to the Windstar Cruises fleet, will each have casinos featuring two black jack tables and eleven slot machines. (Read: Century Casinos Opens Three Casinos on Cruises)
Share Price Performance
The last week was disappointing in terms of share price movement. Share price of most of the companies declined with the highest decline of 6.2% recorded by Caesars Entertainment, followed by decline of 5.5% witnessed by Wynn Resorts. However, Caesars Entertainment and Caesars Acquisition Company gained 0.7% and 2.8% respectively.
Over the last six months, share price of most of the gambling stocks lost value with Caesars Entertainment experiencing a decline of 44.8%, followed by Wynn Resorts that declined 42.8%. However, Boyd Gaming Corporation gained over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
-5.5% |
-42.8% |
|
LVS |
-2.2% |
-18.5% |
|
MGM |
-2.2% |
-12.1% |
|
MPEL |
0.7% |
-25.0% |
|
CACQ |
-4.4% |
-30.0% |
|
BYD |
2.8% |
12% |
|
CZR |
-6.2% |
-44.8% |
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.
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