Analysts seem to be favoring MGM Resorts (MGM) stock over the other major casinos. Of the 17 analysts tracking the stock, 16 of them recommend a “buy.”
On March 28, 2017, the Macao casino industry’s valuation stood at 11.5x, lower than its average of 12.4x in November 2005. In 2016, the industry’s average valuation was 12.1x.
The Macao region relies heavily on the Chinese mainland, as it garners the majority of its visitors and VIP gamers—about 67%—from China and its neighboring countries.
Overall industry capacity rose ~60% in 2016, with key players contributing more than $28 billion to the developing Cotai Strip. This trend is expected to continue in 2017.
Macao’s casinos reported their seventh consecutive month of revenue growth in February 2017. Casinos’ February revenues rose 18% year-over-year (or YoY) to ~$2.9 billion.
As of January 3, 2016, the Macao casino industry valuation stands at 12.6x. This valuation is lower than the industry average valuation of 12.05x since February 2008.
On September 12, 2016, the Macao casino industry valuation stood at 12.6x. This is lower than the industry average valuation of ~12.1x since February 2008.
The Macao region relies heavily on the Chinese mainland, garnering a majority (~67%) of its visitors and VIP gamers from China and neighboring countries.
Macao casinos’ $28-billion investment in integrated resorts will change the city’s gaming. Capacity additions should increase the number of slot tables too.
Wynn Resorts opened its $4.1 billion Wynn Palace on August 22, 2016, and this may have directly contributed to Macao’s casino industry recovery in August.
Macao’s unemployment rate reached 7% in 2000. Growth in tourism and gaming helped curb high rates, bringing the average down to ~3.9% from 1996 to May 2016.
Macao, the largest gaming hub in the world, has seen big growth in the past decade but has also seen declines since China imposed restrictions in 2014.
Three new resorts are set to open in 2016: Las Vegas Sands’s Parisian Macao (LVS), MGM Resorts’s MGM Cotai (MGM), and Wynn Resorts’s Wynn Palace (WYNN).
Macao is the largest gaming hub in the world and the only place in China where gambling is legal. In this series, we’ll see how Macao’s gaming industry has been performing by analyzing key indicators such as gross gaming revenues and visitor arrivals.
As of December 10, 2015, the Macao casino industry’s valuation stands at 12.9x. This is close to the industry average valuation of 12.5x in April 2008.
Prudential (PUK), UBS Group (UBS), Nissan Motor (NSANY), Credicorp (BAP), and Melco Crown Entertainment (MPEL) are among the AB International Growth Fund’s 71 holdings.
Visitor arrivals in the Macao region for the first ten months of the year fell by 2.6%, driven by a 3.5% decline in tourists from Mainland China and a 2.7% decline from Korea.
Recently opened integrated resorts on Macao’s Cotai Strip have seen improvement in business. In 2010, Melco Crown Entertainment’s (MPEL) revenue increased by 94%.
The weakness in the Chinese economy will adversely affect the spending capacity of the people in the country, which in turn will lead to a fall in the number of visitors in the Macao region.
Macao has seen extraordinary growth in the past decade and a half. It has also seen a similar fall ever since the Chinese government imposed anti-corruption restrictions in 2014.
Melco Crown Entertainment has a market capitalization of $9.5 billion. Melco Crown Entertainment fell by 1.9% to close at $19.01 per share as of November 5.
Following its 3Q15 earnings, Las Vegas Sands shares increased 4.5% as it beat earnings expectations. As a result, its valuation multiple increased by 1.5%.
The Las Vegas Sands is focusing on controlling costs in the already weak Macao region. It generated better cash flows as it focused on the higher margin mass and non-gaming segments.
Las Vegas Sands (LVS) announced its 3Q15 earnings report on October 21. LVS beat analysts’ earnings expectations by ~5%, and it missed on its revenue estimates by ~3%.
September marked Macao’s 16th consecutive month of revenue fall. The anti corruption drive by the Chinese government has made conspicuous consumption seem risky.
The analyst at Telsey believes that the Chinese government’s support to the Macao economy is a positive. Zacks also upgraded shares of Wynn Macau to a “buy.”
Wynn Resorts’ (WYNN) third quarter numbers missed most Wall Street analysts’ estimates. The company’s revenues for the third quarter fell to $996.3 million.
The third quarter earnings call from Wynn Resorts disappointed investors. The company’s already weak stock fell by more than 7% in after-hours trading.
The peers are way ahead of Wynn Resorts based on the price-to-sales ratio. The ETFs outperformed Wynn Resorts based on the price movement and PE ratio.
Wynn Resorts (WYNN) has a market cap of $7.5 billion. After the earnings report in 3Q15, it rose by 1.9% to close at $73.76 per share as of October 15, 2015.
As of October 12, 2015, Las Vegas Sands’ (LVS) valuation multiple stands at 11.7x. This is lower than its average forward EV-to-EBITDA multiple of 16.14x.
Las Vegas Sands is expected to continue reporting grim earnings in 3Q15.
Analysts expect LVS to post a year-over-year decline in earnings per share and revenue, driven by weakness in business.
The gaming industry has been heavily dependent on Macao, and the Chinese economy’s troubles don’t seem to be going away soon. Companies are finding new destinations in Japan and Korea to develop the next Macao.
Las Vegas Sands (LVS) stock remained relatively flat or slightly lower in July and August. But the steepest fall came in September, dragging the stock down about 18% in a short time span.
Las Vegas Sands (LVS) had a difficult second quarter, missing both top line and bottom line estimates. The top line fell 19.4%, while operating income fell 28.3%.
After witnessing a decade of exceptional growth in revenues, the Macao casino industry is going through its worst fall with July marking 14 straight months of declining gaming revenues.
A major percentage of visitors at the Macao casinos are from China. In May 2015, the visitors from China contributed to about 66% of the total arrivals.
Inflation is a rise in a currency supply relative to the number of people using it. This leads to a general rise in the price of goods and services in an economy.
