Credit: Shutterstock photoThere was hardly any encouraging news from the two major gambling destinations, Macau and Las Vegas, in the last few days. Gambling revenues in Macau for the month of Jan 2015 declined in double digits - the fourth consecutive monthly double-digit decline.
In one other development, the Nevada Gaming Control Board announced a decline in revenues in the region for December as well as for 2014. Also, reports that the Macau government would submit a bill to ban smoking in the VIP rooms came as a blow. The ban, if imposed, would come at a time when the region is already bearing the brunt of an anti-corruption drive.
In one other development, Las Vegas Sands Corp. ( LVS ) announced fourth quarter 2014 and full year results. While quarterly earnings beat the Zacks Consensus Estimate, revenues missed the same.
Amid the current challenging environment, Melco Crown Entertainment Limited ( MPEL ), a leading casino operator, seems to be busy developing casinos to maintain its position. The company is set to launch its new integrated casino resort, City of Dreams Manila. (Read the latest development: Gambling Stock Round Up for Jan 12, 2015 )
Recap of the Week's Important Stories:
1. Gambling revenues in Macau for the month of January declined 17.4% to 23.7 billion patacas, according to the Macau gaming and inspection bureau. This marked the eighth consecutive monthly decline since Jun 2014 and the fourth consecutive monthly double-digit decline. The slump reflects a 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, this has lowered footfall at the local casinos.
Meanwhile, political unrest and a smoking ban on mass market gaming floors and pro-democracy demonstrations in Hong Kong have compounded woes. However, the decline compared favorably with a decline of 30% in December.
2. Las Vegas Sands posted mixed fourth quarter results wherein earnings of 92 cents beat the Zacks Consensus Estimate of 81 cents by 13.5%. Also, it surged 27.8% year over year. The upside in earnings reflects a decline in operating expenses and improved margins. However, the positives were partially offset by weakness in VIP gambling.
Not surprisingly, quarterly net revenue of $3.42 billion missed the Zacks Consensus Estimate of $3.55 billion by 3.8% and declined 6% year over year due to weak performance in Macau. Gross gaming revenues in Macau declined in double digits in all three months of the quarter. The downside is the result of restrictions on VIP gamblers in order to stop billions of dollars from being siphoned off illegally from mainland China to Macau. (Read: Las Vegas Sands' Q4 Earnings Beat on Lower Costs )
3. After remaining flat year over year for the month of November, Nevada gambling revenues declined approximately 8% to $950.7 million for the month of December, according to the Nevada Gaming Control Board. Revenues at the Las Vegas Strip that accounts for more than half of Nevada's total revenue fell 16.4%, marking the fifth consecutive monthly decline. Decline in revenues from Baccarat, a lucrative but volatile card game, which is often a big reason behind swinging casino fortunes, pulled down revenues.
Owing to the decline in revenues in most months of the year, gaming revenues for 2014 declined 1.1% year over year. This marked the first decline since the recession. Las Vegas strip gaming revenues dropped 2.1% to $6.37 billion in 2014.
4. Per media reports, Alexis Tam Chon Weng, Secretary for Social Affairs and Culture has announced that the Macau government would submit an amendment bill to the legislative assembly in the first half of 2015 to implement a smoking ban in VIP rooms and airport-style smoking pods on mass gaming floors. The smoking ban that was implemented only for mass gaming floors in Oct 2014 reportedly had 10%-15% negative impact on mass gaming revenues. Another ban would worsen the situation.
Companies that are expected to be most affected by the action include Las Vegas Sands, MGM Resorts International ( MGM ), Wynn Resorts Ltd. ( WYNN ) and Melco Crown Entertainment, as they earn a better part of their revenues from the region.
5. Last week, Melco Crown Entertainment announced that it will launch its long-awaited new integrated casino resort, City of Dreams Manila today. City of Dreams Manila is a leisure, gaming and entertainment destination resort located at Entertainment City, Manila, Philippines. It features six hotel towers, including the approximately 260-room Crown Towers hotel and the 321-room Nobu Hotel Manila, as well as numerous specialty restaurants and bars, gaming facilities and a multi-level car park.
City of Dreams Manila will also feature three distinctive entertainment venues, including Manila's first branded Family Entertainment Center, a live performance central lounge inside the casino and a nightclub.
Performance
The last week remained quite subdued in terms of share price movement. Shares of some of the companies declined over the last five trading sessions with the highest decline of 6.6% recorded by Caesars Entertainment Corp. ( CZR ). Caesars Acquisition Company ( CACQ ) came in next as it declined 4.9%. However, shares of Wynn Resorts, Melco Crown Entertainment, and Las Vegas Sands gained last week.
Over the last six months, share prices of most of the gambling stocks lost value, with Caesars Entertainment declining the most at 33.8%, followed by a decline of 32.5% recorded by Caesars Acquisition. However, Boyd Gaming Corp. ( BYD ) gained 15.9% over the same time frame.
What's Next in the Gambling World?
Wynn Resorts that has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -7.64% is scheduled to report its fourth quarter and 2014 results on Feb 3, 2015.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
