The first week of March proved to be disappointing for the gambling industry. Macau's Gaming Inspection and Coordination Bureau announced a decline in gambling revenues for the month of Feb 2015 – marking the ninth straight month of decline.
Also, Rolling Chip Turnover at Iao Kun Group (NASDAQ:IKGH) plunged in Feb 2015 – marking the fifth consecutive monthly decline. Both the downsides can be attributed to China’s anti-corruption campaign that is hurting footfall in Macau.
In one other development, Caesars Entertainment (NASDAQ:CZR) released dismal fourth-quarter 2014 results. The company’s quarterly loss was wider than the Zacks Consensus Estimate. Revenues also missed the consensus mark. Caesars Acquisition (NASDAQ:CACQ) also posted disappointing fourth quarter results. (Read last development: Gambling Stock Round Up for Mar 2, 2015)
Recap of the Week’s Important Stories:
1. Macau gambling revenues for the month of Feb 2015 plunged approximately 49% to 19.54 billion patacas – marking the ninth month of consecutive decline and the fifth consecutive month of double digit decline. February’s decline was also higher than the Dec 2014 record decline of 30%.
Despite the Chinese New Year holidays that spanned from Feb 18 to Feb 24, gambling revenues witnessed a huge fall owing to the nationwide crackdown on corruption in China. Meanwhile, a cooling Chinese economy, political unrest and a smoking ban on mass market gaming floors have compounded woes. (Read: Gambling Stocks Remain Stoic Against Macau February Fall)
2. Iao Kun Group Holding posted weak Rolling Chip Turnover for the month of Feb 2015. 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 $0.63 billion fell 64% year over year. Rolling Chip Turnover had declined 27%, 30% and 48% in Oct, Nov, Dec 2014, respectively and 37% in Jan 2015. Win rate for the month of Feb 2015 was 4.28%.
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. Iao Kun Group is engaged in the promotion of five major luxury VIP gaming facilities in Macau, which exposes it to the sluggish economic conditions in the region.
3. In one other development, Caesars Entertainment released fourth-quarter 2014 results. Its adjusted loss per share of $3.56 was wider than the Zacks Consensus Estimate of a loss of $2.04 as well as the year-ago quarter’s loss of $3.21 per share. Caesars’ results were hurt by higher interest expenses, start-up costs from new properties as well as new food and beverage outlets and climbing overhead expenses.
Net revenue of $2.13 billion increased 6.3% year over year, thanks to an improvement in casino and food and beverage revenues. However, revenues missed the Zacks Consensus Estimate of $2.19 billion by 2.6%. The company stated that strength in its interactive business; new hospitality offerings and a sequential improvement in same-store regional results were partially offset by an unfavorable performance at Caesars Palace. Shares declined approximately 8% in response to lackluster results. (Read: Caesars Entertainment Down on Wider-than-Expected Q4 Loss)
4. Caesars Acquisition Company posted disappointing fourth quarter results with adjusted earnings of 1 cent that declined significantly year over year. Also, the company significantly missed the Zacks Consensus Estimate of 10 cents. Caesars Acquisition Company is a casino asset and entertainment firm that was formed to make an equity investment in Caesars Growth Partners, LLC, a joint venture between CACQ and Caesars Entertainment. CACQ is CGP LLC's managing member and sole holder of all of its outstanding voting units.
During the quarter, the firm commenced operations at The LINQ Hotel & Casino following the completion of Phase 1 of renovations.
Share Price Performance
Share price of most of the companies declined over the last five trading sessions with the highest decrease of 9.2% recorded by Caesars Entertainment on lackluster fourth quarter 2014 results, followed by a 3.9% decline at Wynn Resorts (NASDAQ:WYNN)
Over the last six months, share price of most of the gambling stocks lost value with Caesars Acquisition witnessing the maximum decline of 30.2%, followed by a decline of 21.4% by Wynn Resorts. However, Boyd Gaming (NYSE:BYD) gained 24% over the same time frame.
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.