Don't Panic About Macau, Focus On These Casino Stocks

Things had just started to look better for the casino industry with the mecca of casino gaming – Macau – slowly returning to life. Gaming revenues in the region grew on an annual basis in November to register four consecutive months of gains, following the extended slump of over two years.

However, a recent report by South China Morning Post, stating that the Chinese government is apparently planning to cut the amount of money people can withdraw from China UnionPay ATMs in the gaming region, has once again hit the Macau-focused stocks hard. Reportedly, effective Dec 10, the daily withdrawal limit will be halved from 10,000 to 5,000 patacas (or about $1.25 billion to $626 million).

Consequently, share price of casino companies, Wynn Resorts Ltd. (NASDAQ:WYNN) , MGM Resorts International (NYSE:MGM) , Melco Crown Entertainment Ltd. (NASDAQ:MPEL) and Las Vegas Sands Corp. (NYSE:LVS) dropped in yesterday’s trading session, as Macau is a key operating region for these companies.

Investors are thus clearly fretting over the new intervention from government officials and believe it could prove to be a roadblock for the Macau gaming region. They also fear that the region’s revenues will once again come under pressure.

All Is Not Lost

Investors, however, need not sweat bullets just yet as there are still certain players in the casino industry, who seem to be untroubled by the recent ordeal.

Here, we are emphasizing on the regional players in the casino space as more local exposure should insulate these companies from losses facing the Macau-focused operators. They should also continue to cash in on the favorable trends of an improving employment rate and positive tourism numbers in the Las Vegas region.

One such company that stands out is Monarch Casino & Resort, Inc. (NASDAQ:MCRI) , which through its subsidiaries, owns and operates Atlantis Casino Resort Spa, a hotel/casino facility in Reno, NV; and Monarch Casino Black Hawk in Black Hawk, CO. Amid all the concerns around Macau, the company’s shares lost just 0.8% of its value yesterday and had a regular trading session. Monarch Casino & Resort sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Interestingly, in the last six months, the stock has surged nearly 16%. Moreover, the company has been seeing an upward trend in earnings estimate revision. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 earnings increased 7.9% and 6.8%, respectively. Further, for full-year 2016, sales growth is expected to be 6.7% while earnings per share (EPS) are expected to grow a solid 14.3%.

Another stock that worth’s having a look despite having a Zacks Rank #3 (Hold) is Boyd Gaming Corporation (NYSE:BYD) . It in fact gained 3.6% in yesterday’s trading session. Headquartered in Las Vegas, Boyd Gaming is a leading diversified owner and operator of 22 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi and New Jersey.

Notably, in the last six months, the stock has returned nearly 8%. Upward estimate revisions for 2016 and 2017 earnings add to the optimism. The Zacks Consensus Estimate for 2016 and 2017 EPS improved 6.3% and 11.1%, respectively, over the last 60 days. Moreover, for full-year 2016, EPS is projected to grow a decent 7.3%.

Bottom Line

China's capital controls measures have certainly raised questions on the fate of the Macau gambling industry in the near term. However, keeping in mind the rosy forecast for some of the regional players, investors should not shy away from putting money into the casino space and cash in on the bountiful opportunities.

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