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Gambling Stock Roundup: Macau Revenues on the Decline; Century Casinos to Buy Apex Casino

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Last week was an eventful one for the gambling industry with gambling revenues in Macau for June plunging lower than expected. Meanwhile, the Nevada Gaming Control Board announced that revenues decreased in the region in May.

Interestingly, Century Casinos Inc. (CNTY - Free Report) announced its planned purchase of St. Albert’s Apex Casino for a net value of CAD 15.9 million.

In a separate development, Wynn Resorts Ltd. (WYNN - Free Report) has again postponed the opening of Macau’s Wynn Palace.

Recap of the Week’s Most Important Stories  

1.    Gross gaming revenues (GGR) for the month of June fell 8.5% on a yearly basis to approximately $2 billion or 15.9 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. Notably, this marked the weakest monthly revenue since Sep 2010 and the 25th month of consecutive decline.

However, the decline was lower than the 9.6% decline recorded in May 2016 and compared favorably with the median estimate of a 9.5% decline by analysts surveyed by Bloomberg. Tourists and leisure gamblers helped boost revenues.

Nonetheless, with the current decline, GGR in Macau for the first six months of 2016 has plummeted 11.4% 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 slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors have compounded woes.

GAMING Industry Price Index

GAMING Industry Price Index

2.    According to the Nevada Gaming Control Board, Nevada gambling revenues in May 2016 decreased 4.5% from the year-ago period to $958.1 million. The decline followed the slump in March and April. More specifically, casino revenues in the Las Vegas Strip – which accounts for more than half of Nevada’s total revenue – were down 11.7% year over year in May. Further, Reno recorded a 4.8% fall in casino revenues.

3.    Century Casinos has entered into a purchase agreement to buy Apex Casino situated in the Edmonton, Alberta suburb of St. Albert. Century Casinos has agreed to pay a net amount of CAD 15.9 million for its purchase of Apex Casino. Notably, the amount comes up to roughly four times Apex Casino's trailing twelve-month EBITDA. Additionally, Century Casinos will take over Apex Casino’s real estate assets for CAD 12.0 million.

Notably, Apex Casino opened in 1994 and features 382 slot machines, 11 live table games, a restaurant, a bar, a lounge with live entertainment and a banquet center. Meanwhile, the acquisition is subject to regulatory approvals.

4.    Wynn Resorts has once again delayed the opening of its new resort — Wynn Palace — in the Cotai area of Macau. The company has now set an opening date of Aug 22, 2016 for the resort. Last year, the company had postponed the opening from March to June. Notably, the postponement of the opening date comes in as an anti-corruption drive in China hurt the gambling industry. Meanwhile, the company expects  the opening of Wynn Palace to help boost tourist traffic at Macau.

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

4.7%

33.5%

LVS

4.5%

0.7%

MGM

5.8%

2.4%

MPEL

7%

-22.6%

CACQ

-0.3%

87.3%

BYD

4.9%

-3.7%

CZR

-9.7%

-9.8%

Last week, share price movement of the major stocks was predominating encouraging, with majority of the companies witnessing positive movement. Melco Crown Entertainment Limited gained the highest at 7% followed by MGM Resorts International’s (MGM - Free Report) 5.8% increase. However, Caesars Entertainment Corporation (CZR - Free Report) declined the most at 9.7%.

Meanwhile, over the last six months, the price performance of the gambling stocks was a mixed bag. Among the stocks that appreciated the most were Caesars Acquisition Company and Wynn Resorts, witnessing an increase of nearly 87.3% and 33.5%, respectively. On the contrary, Melco Crown and Caesars recorded a decline over the same time frame.

What’s Next in the World of Gambling?

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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