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Gambling Stock Roundup: Nevada August Revenues Fall, Macau Remains in Focus

The last week was all about the top two gambling destinations, Macau and Las Vegas. After being repeatedly disappointed with Macau gambling revenues, casino investors were pinning their hopes on another top gambling destination, Las Vegas. However, their hopes dashed when Nevada gaming revenues declined for the third consecutive month in August.

Meanwhile, gaming revenues in Macau fell 33% marking the 16th consecutive monthly decline and the thirteenth consecutive double-digit decline. In fact, we would like to remind investors that September has been bad for casino operators like Wynn Resorts Ltd. WYNN , Las Vegas Sands Corp. LVS , MGM Resorts International MGM , and Melco Crown Entertainment Limited MPEL as a result of a series of negative events. While on the one hand, Neptune Group, a junket operator's shareholder, reportedly faced money laundering charges, on the other, authorities were found investigating the reported theft at another junket group, Dore Entertainment, which operates at Wynn Resorts' Wynn Macau casino.

Meanwhile, the news that Neptune Group might cut back on its business and lower its operations in the region if the situation in the gambling industry does not improve came as a big blow for the casino operators. In fact, Fitch Ratings lowered its Macau gaming revenue forecasts for 2015 in the third week of September owing to some of these issues. (Read More: Casino Stocks Fall as Fitch Cuts 2015 Macau Revenue View ). However, the declaration from the Chinese government that it is considering measures to boost Macau's economy came as a relief for these casino operators.

In other developments, Churchill Downs Inc. CHDN and Full House Resorts Inc. FLL expanded their portfolio last week. While Churchill Downs completed the acquisition of 25% stake in Saratoga Harness Racing, Inc.'s Saratoga Casino Holdings, LLC; Full House Resort announced that it intends to acquire operating assets of Bronco Billy's Casino and Hotel in Cripple Creek, CO. (Read earlier development: Gambling Stock Round Up for Sep 21, 2015 ).

Recap of the Week's Important Stories:

1. Gross gaming revenues in Macau plunged 33% to 17.1 billion patacas or $2.15 billion for the month of September per Gaming Inspection and Coordination Bureau. The decline was hardly a surprise and came in line with analysts' expectations. The current decline marks the 16thconsecutive monthly decline and the thirteenth consecutive double-digit decline. The reason for the decline more or less remains the same. The anti-graft corruption campaign has been keeping gamblers at bay more than a year now. (Read: Gaming Stocks in Focus as Macau September Revenues Fall )

In one other development in the region, Neptune Group, a junket operator, reportedly stated that it might trim its operations in the region if the situation in the gambling industry did not improve. Neptune is a loan facilitator for VIP gamblers and such a step would leave less cash for people who come to try their fortunes. (Read: Macau Junket Plans to Trim Operations, Casino Stocks Fall )

2. Share price of casino operators like Las Vegas Sands and Wynn Resorts got a boost last week after the head of the Chinese government's liaison office in Macau, Li Gang reportedly signaled that the central government is considering measures to support Macau's economy in all aspects and is set to introduce favorable policies for Macau. Though the government did not clearly mention the details, it plans to take steps that will boost growth in Macau. These would include approval of Macau's maritime expansion plans that will aid shipping and tourism. Also, the steps could enable more mainland Chinese cities to offer individual visas as well as offer multi-entry permits.

3. Per the Nevada Gaming Control Board, revenues from Nevada declined approximately 1.4% in August - marking the third consecutive monthly decline. Revenues of the Las Vegas Strip fell approximately 4.7% due to a decline in baccarat revenues. Baccarat - a lucrative but volatile card game, which is often a big reason behind swinging casino fortunes - fell 24.1%. Per gaming analysts, the downside in baccarat play can be attributed to a wavering economy in China. VIP gamblers have become cautious, given the anti-corruption campaign run by Chinese officials.

While revenues at North Las Vegas and Boulder Strip grew in double digits, the Mesquite, Reno and Lake Tahoe markets experienced a decline. For the first eight months of 2015, statewide gaming revenues were up less than 1% while Las Vegas Strip revenues were down 1.9%. (Read: Nevada Gaming Revenues Fall for the 3rd Straight Month )

4. Full House Resort has entered into an agreement with Pioneer Group, Inc. for the acquisition of the operating assets of Bronco Billy's Casino and Hotel in Cripple Creek. The acquisition worth $30.0 million is expected to close in late 2015 or early 2016. Bronco Billy's has approximately 830 slot and video poker machines, 13 table games, a 24-room hotel, a steakhouse, four casual dining outlets and an outdoor amphitheater.

Cripple Creek Bronco Billy's is located on the north side of Bennett Avenue, along the key city block that accounts for the bulk of the town's gaming activity. It is approximately at an hour's distance from Colorado Springs, Colorado's second largest city. The Colorado Springs metropolitan statistical area has a population of approximately 668,000 and has shown steady growth in recent years. This justifies the company's decision to acquire this strategically positioned entertainment facility. Moreover, it is expected to diversify the company's geographic presence.

5. In one other development, Churchill Downs announced that it has completed the acquisition of 25% membership interest in Saratoga Harness Racing, Inc.'s Saratoga Casino Holdings, LLC. Saratoga Casino is a newly formed entity that includes Saratoga Casino and Raceway in Saratoga Springs, N.Y. and has 50% interest in a joint venture with Delaware North Companies to manage the Gideon Putnam Hotel and Resort in Saratoga Springs, NY. Moreover, Saratoga Casino and Raceway includes a$40 million hotel expansion that is under construction and scheduled to open late spring 2016. The transaction is worth $24.8 million.

Share Price Performance

The last five trading days were quite positive in terms of share price movement as all the companies with a presence in Macau ended in green despite the monthly decline in revenues in the region. The upside was largely due to the news that the government is considering measures to support Macau's economy in all aspects and is set to introduce favorable policies for Macau. Wynn Resorts experienced the highest increase of 16.7% followed by Boyd Gaming Corporation's BYD increase of 11.3%.

Over the last six months, shares of most of the gambling stocks have lost value with Wynn Resorts experiencing the highest decline of 50.5%, followed by Caesars Entertainment Corporation that witnessed a decline of 33.1%. Only Boyd Gaming and Caesars Acquisition Company gained over the same time frame.

Company Last Week Last 6 months
WYNN 16.7% -50.5%
LVS 1.5% -25.3%
MGM 6.5% -7.3%
MPEL 8.5% -32.7%
CACQ 3.5% 10.7%
BYD 11.3% 22.2%
CZR 6.6% -33.1%

What's Next in the Gambling World?

Since no other major development is expected next week, the performance of gambling stocks is not expected to change significantly.

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LAS VEGAS SANDS (LVS): Free Stock Analysis Report

WYNN RESRTS LTD (WYNN): Free Stock Analysis Report

MGM RESORTS INT (MGM): Free Stock Analysis Report

BOYD GAMING CP (BYD): Free Stock Analysis Report

MELCO CROWN ENT (MPEL): Free Stock Analysis Report

CHURCHILL DOWNS (CHDN): Free Stock Analysis Report

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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.

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