Stocks in the gambling industry seem to be looking up with major companies gaining value, buoyed by a turnaround in gambling revenues in Macau. Notably, revenues in the region rose in August, bouncing back from over two years of decline.
This led to a rally in share prices of casino companies like Wynn Resorts Ltd. (NASDAQ:WYNN) , MGM Resorts International (NYSE:MGM) , Melco Crown Entertainment Limited (NASDAQ:MPEL) and Las Vegas Sands Corp. (NYSE:LVS) .
Moreover, the Nevada Gaming Control Board announced an increase in revenues in the region in July.
Meanwhile, Isle of Capri Casinos, Inc. (NASDAQ:ISLE) posted weak financial results for the first quarter of fiscal 2017, with both earnings and revenues lagging the Zacks Consensus Estimate.
On the other hand, Iao Kun Group Holding Company Limited (NASDAQ:IKGH) revealed its strategic initiatives for the Macau region, after taking into account the dim prospects of recovery in the VIP market.
GAMING Industry Price Index
Recap of the Week’s Most Important Stories
1. Gross gaming revenues (GGR) for the month of August rose 1.1% on a yearly basis to approximately $2.4 billion or 18.8 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. After witnessing 26 months of consecutive decline, this rise in August, marked a revival for Macau.
Notably, new resorts including Wynn Resorts’ Wynn Palace, attracted visits by tourists and leisure gamblers which helped boost revenues. Moreover, the rise compared favorably with the 4.5% drop recorded in Jul 2016 and the median estimate of a 1.5% decline by Bloomberg analysts.
Meanwhile, GGR in Macau for the first eight months of 2016 plummeted 9.1% year over year. Notably, gaming revenues in Macau have been falling since Jun 2014, given the nationwide crackdown on corruption in China. This 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, this lowered footfall at local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes.
Nonetheless, efforts undertaken by Macau operators to revive revenues by adding more non-gaming facilities in order to attract tourists and recreational gamblers, have finally started yielding results.
Further, Las Vegas Sands’ subsidiary, Sands China Ltd.’s new Macau resort, The Parisian, which is set to open on Sep 13, 2016, will likely attract more mainstream visitors and help drive mass-market growth, going forward.
2. According to the Nevada Gaming Control Board, Nevada gambling revenues in Jul 2016 increased nearly 10% from the year-ago period to $1.02 billion. This continued the solid performance witnessed in June, after the slump in April and May. More specifically, casino revenues in the Las Vegas Strip – which accounts for more than half of Nevada’s total revenue – were up 16.8% year over year in the month. Further, Reno recorded an 11.4% rise in casino revenues.
3. Isle of Capri Casinos posted lower-than-expected first-quarter fiscal 2017 results with earnings of 26 cents lagging the Zacks Consensus Estimate of 29 cents by 10.3%. Meanwhile, earnings witnessed a decline of 7.1% on a year-over-year basis owing to lower revenues.
Net revenue of $240.9 million decreased 2.4% year over year due to a fall in casino, rooms and food, beverage, pari-mutuel and other revenues. Moreover, the top line missed the consensus mark by 2.5%.
4. Iao Kun Group Holding Company recently announced that given the continuing testing VIP gaming environment in Macau, the company is undertaking an all-inclusive strategic review of its VIP gaming room operations therein. Notably, in order to cut costs, the company has shut down its VIP gaming room at the Sands Cotai Central Casino in Macau, effective Aug 31. It expects the closure of the facility to bring in annual overall savings of roughly $750,000. Moreover, once the review is complete, the company may close a couple of VIP gaming rooms to boost operating earnings. Interestingly, with this restructuring, the company aims to enhance its operating performance.
Price Performance
The following table shows the price movement of the major gambling stocks over the past week and the last six months:
Company | Last Week | Last 6 Months |
WYNN | 1.8% | 8.7% |
LVS | 5.9% | 5.7% |
MGM | 3.5% | 21.3% |
MPEL | 7.4% | -13.7% |
CACQ | 3.2% | 106.4% |
BYD | -0.3% | 8.9% |
CZR | -3.1% | -33.2% |
Over the last five trading sessions, share price movement of the major stocks was encouraging. Melco Crown gained the highest at 7.4% followed by Las Vegas Sands’ 5.9% increase. However, Caesars Entertainment Corporation (NASDAQ:CZR) lost around 3.1% value.
Meanwhile, over the last six months, the price performance of gambling stocks has been mostly positive. Among the stocks that appreciated the most were Caesars Acquisition Company (NASDAQ:CACQ) and MGM Resorts, witnessing an increase of nearly 106.4% and 21.3%, respectively. On the contrary, Caesars Entertainment recorded a decline of 33.2% over the same time frame.
What’s Next in the Gambling Space?
We note that gambling stocks have raked in considerable gains in recent sessions. Moreover, given the new resort openings and increased visitation trends, we expect the industry to sustain its momentum, going forward.
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LAS VEGAS SANDS (LVS): Free Stock Analysis Report
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ISLE OF CAPRI (ISLE): Free Stock Analysis Report
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