The Macao region relies heavily on the Chinese mainland, as it garners the huge majority (about 67%) of its visitors and VIP gamers from China and its neighboring countries.
Wynn Resorts’ (WYNN) share price plummeted 6.1% immediately after its 4Q14 results. However, the share price should gain momentum once new resorts are open.
After the 4Q14 results were announced, Wall Street analysts reviewed Melco Crown Entertainment’s results. They increased its closing share price by 12%.
Rolling chip volume refers to the amount of non-negotiable chips wagered and lost by the rolling chip market segment. It’s largely represented by VIP players.
Established in 2004, Melco Crown Entertainment (MPEL) owns, develops, and operates casino gaming and entertainment resort facilities. It’s focused on Asia.
On the Las Vegas Strip, the total casino revenue fell 16.4% to $555 million in December 2014. Baccarat gambling accounted for the largest share of the decline.
Las Vegas’ lodging market occupancy level remained well above the US historical norm. The average occupancy at the Las Vegas Strip was ~78.4% in December 2014.
WYNN’s hotel occupancy increased at Macau and Las Vegas in 4Q14. Macau had 98.6% and Las Vegas had 82.1% compared to 96.7% and 80.8%, respectively, in 4Q13.
WYNN’s adjusted property EBITDA fell a whopping 29.3% year-over-year to $352 million, the biggest year-over-year fall since the second quarter of 2009.
WYNN’s VIP table games drop in 4Q14 was $20.7 billion, 39.9% lower than 4Q13. Drop is cash and net markers issued and deposited in a gaming table drop box.
WYNN’s net revenues for 4Q14 were $1,138 million, down 25.1% due mostly to a 32.0% decrease in Macau operations and 5.8% decrease in Las Vegas operations.
Las Vegas Sands’ adjusted property EBITDA at Marina Bay Sands in Singapore doubled, reaching a property record of $518.5 million, up ~100% year-over-year.
As of January 30, LVS’s one year forward EV-EBITDA stood at 10.4x compared to a peer group average of 11.1x, making it most likely the safest stock to own.
Las Vegas Sands (LVS) returned $635.3 million to shareholders in 4Q14. Of that amount, $235.0 million returned to the company through share repurchases.
Las Vegas Sands has a greater forward dividend yield than the S&P 500’s (SPY). As of January 27, LVS’s 2015 forward dividend yield was 4.6%. SPY’s was 2.1%.
Sands China Ltd. (or SCL), a subsidiary of LVS, dominates the hotel market in Macao with 9,277 hotel rooms, or 38% of Macao’s four- and five-star hotels.
Las Vegas Sands will burn huge cash in 2015 to fund development of The Parisian Macao in 2015 and 2016 and the St. Regis property at Sands Cotai Central.
Las Vegas Sands’ revenues for 4Q14 were $3,416 million, down 6.6% year-over-year, mainly due to a 15.9% year-over-year decrease in the Macao operations.
China’s consumer sentiment indicator measures the level of consumer confidence in the economy. The index rises when consumers gain confidence in the economy.
According to DSEC, Macau’s visitors’ arrival decreased by 1.8% year-over-year, or YoY, to 2,540,070 in December 2014. Visitors from Mainland China surged 1% YoY.
Mass market customers spend much less—compared to VIPs. Recently, the mass market segment in Macau witnessed an increase in the growth rate in customers.
The unemployment rate measures the number of people actively looking for a job as a percentage of the labor force. Macau’s unemployment rate didn’t change in December.
Price performance Let’s explore the five-year share price performance of Melco Crown Entertainment (MPEL) relative to its peers, as well as the broader market that includes SPDR S&P 500 ETF (SPY). Share prices of gambling stocks collapsed heavily over the last three to six months. This drop largely resulted from the Chinese government’s crackdown on corrupt officials, which negatively […]
Melco Crown’s increased capex primarily resulted from the development of Studio City and various City of Dreams projects, including the fifth hotel tower.
MPEL derives ~94% of revenues from casino operations. Its casino business gross margin is 50% for the trailing 12-month period ending September 30, 2014.
Merger evaluation The Bally Technologies, or Bally, board of directors closely evaluated the proposed merger with Scientific Games (SGMS) and the transactions contemplated by the merger agreement. The board considered a range of factors before approving the merger agreement and recommending that Bally’s stockholders vote to approve it. Merger consideration The $83.30 per share offered to holders of Bally’s common stock […]
The initial term of each lease will be for 15 years with four five-year renewals. CZR will guarantee payments and performance of the OpCo’s obligations.
The increase in US public debt threatens the nation’s economic growth. The country would have to increase taxes. This would decrease personal disposable income.
Improvement in the employment rate could drive demand for leisure activities. An increase in wages could drive consumers’ disposable income. This would benefit casinos.
Baccarat gambling is a high-stake table game. It’s more popular in the Asian markets than in the US. VIP Baccarat represents nearly two-thirds of the gaming revenue in Macau.
In Las Vegas, the lodging market occupancy levels remained well above the US historical norm. The average occupancy in Las Vegas was ~89.2% in October 2014.
US casino operators are considering REIT spin-offs to achieve higher valuations. Real estate is a main income source. REITs distribute at least 90% of their taxable earnings to shareholders.
The last three resorts that opened on Macau’s Cotai Strip increased revenue for their operators. This means that Macau’s gaming revenues depend on its supply power.
Macau’s gaming forward EV/ EBITDA multiple has been declining since January 2014. Analysts started to reduce the EBITDA estimates due to key issues in Macau.
Macau’s gaming slowdown may continue into 2015. It’s due to a lack of new resorts. Macau’s casino gambling revenue is expected to keep declining until mid-2015.
Casino gambling is spread across major destinations around the world. Casinos, at major destinations, are being influenced by certain factors. This is hampering industry growth.
Pinnacle Entertainment (PNK) has approximately 59.2 million outstanding shares, with free float of 57 million shares. Institutional investors hold around 122% of the float.
