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Gambling Stock Roundup: Macau Sales Rise Again in November, Nevada Thrives in October

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Last week was quite an eventful one for the gambling industry with revenues for November rising more than anticipated in Macau. This marked the fourth consecutive month of growth, following the extended slump of over two years.

Meanwhile, the Nevada Gaming Control Board announced an increase in revenues in the region in October.

On the other hand, Isle of Capri Casinos, Inc. reported lower-than-expected results for second-quarter fiscal 2017. Both earnings and revenues lagged the Zacks Consensus Estimate in the quarter.

In a separate development, Melco Crown Entertainment Limited unveiled the new hotel brand for its fifth hotel tower at City of Dreams – Morpheus – which is named after the God of Dreams.

Gaming Industry Price Index

 

Gaming Industry Price Index

Recap of the Week’s Most Important Stories  

1.    Gross gaming revenues (GGR) for the month of November rose 14.4% on a yearly basis to approximately $2.4 billion or 18.8 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. This marked the fourth successive month of gains and the strongest year-over-year growth in nearly three years, thereby continuing the revival in Macau.

Notably, new resorts including Wynn Resorts Ltd.’s (WYNN - Free Report) Wynn Palace (opened on Aug 22) and Las Vegas Sands Corp.’s (LVS - Free Report) subsidiary, Sands China Ltd.’s The Parisian (opened on Sep 13), continued to attract tourists and leisure gamblers, giving a boost to revenues. Moreover, the rise compared favorably with the 8.8% increase recorded in Oct 2016 and the median estimate of an 11% rise by Bloomberg analysts.

Meanwhile, GGR in Macau for the first 11 months of 2016 were down 4.3% year over year. Notably, gaming revenues in Macau have been declining since Jun 2014, given the 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.  

In fact, the anti-graft corruption drive undertaken by the Chinese government is still keeping VIP gamblers at bay.

Nonetheless, efforts undertaken by Macau operators to revive revenues by adding new resorts and more non-gaming facilities in order to attract tourists and recreational gamblers have started yielding results. This is evident from gambling revenue growth in the past four months.

2.    According to the Nevada Gaming Control Board, Nevada gambling revenues inched up 11.1% in Oct 2016 from the year-ago period to nearly $986.2 million. The rise continues the solid performance in Nevada since June this year, except for the blip witnessed in August.

More specifically, casino revenues in the Las Vegas Strip – which accounts for more than half of Nevada’s total revenue – were up 14% year over year in the month. Meanwhile, Reno recorded a 3.6% rise in casino revenues.

3.    Isle of Capri Casinos’ second-quarter fiscal 2017 earnings of 13 cents lagged the Zacks Consensus Estimate of 20 cents by 35% and decreased 7.1% year over year due to lower revenues and profits.

Quarterly net revenues of $198.6 million lagged the Zacks Consensus Estimate of $210 million by 5.4% and were down 0.9% year over year. On a consolidated basis, adjusted EBITDA dipped 0.9% year over year to $42.9 million owing to lower revenues (read more: Isle of Capri Casinos Q2 Earnings, Revenues Miss).

4.    Leading owner and developer of casino gaming and entertainment resort facilities primarily in Macau, Melco Crown, is scheduled to launch its hotel brand, Morpheus, at the City of Dreams.

Notably, the new brand differentiates itself by symbolizing a modern, simple yet spectacular, and suave kind of luxury and would cater to the expectations of sophisticated and high-end travelers.

In fact, this Zacks Rank #1 (Strong Buy) company believes that Morpheus signifies the foundation of a new wave of affluent hospitality experience in Macau with the potential of drawing visitors from global destinations. We note that the new hotel at City of Dreams is expected to begin operations in 2018. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

-3.3%

0.1%

LVS

-2.5%

30.5%

MGM

1%

20.6%

MPEL

-2.6%

33.6%

MCRI

-1%

17.9%

CACQ

6.1%

19.2%

BYD

-1.7%

-3%

Over the last five trading sessions, share price movement of the major gambling stocks was predominantly negative. Wynn Resorts and Melco Crown lost the maximum at 3.3% and 2.6%, respectively. Meanwhile, Caesars Acquisition Company and MGM Resorts International’s (MGM - Free Report) gained a respective 6.1% and 1%.

However, over the last six months, the price performance of gambling stocks has been largely positive. Among the stocks that appreciated the most were Melco Crown and Las Vegas Sands that gained 33.6% and 30.5%, respectively. On the contrary, Boyd Gaming Corporation (BYD - Free Report) recorded a decline of 3% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatility to continue in the coming days.

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