Macao Casinos Delivered Again in June

From Reuters

Macau, the world's largest gambling market, posted an annual 52.4 percent rise in gaming revenue in June to 20.8 billion patacas ($2.6 billion), the Macau government said on Friday, signalling a ravenous gambling appetite from Chinese tourists.

Casino stocks that stand to benefit from a regional presence rallied on Friday : Las Vegas Sands(LVS) up 4.22% today, MGM Resorts (MGM) up 4.16%, Wynn Resorts (WYNN) up 4.26%, Melco Crown Entertainment (MPEL) up 6.03%.

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Disclosure: The blog author does not own any of the above positions in her personal account as of July 3, 2011

Why are casino stocks relatively strong?

While Dow Jones Index dropped more than 2% today, casino stocks that have exposures to Macao held up quite nicely. MPEL was up 5%, LVS was up 1% while WYNN was down less than 1% . MGM, another casino operator that has much smaller shares in Macao than the other three dropped together with the rest of the market.

The source of strength was likely to have come from gaming revenue statistics released by the Gaming Inspection and Coordination Bureau of Macao. According to Wall Street Journal,

Gambling revenue in Macau rose 42% in May from a year earlier, government statistics issued Wednesday show, as the opening of a massive new casino resort last month helped revenue rise to a record high for the fourth month in a row.....................................

Gambling revenue in the Chinese territory rose to 24.31 billion patacas ($3 billion) last month, up from 17.08 billion patacas a year earlier, according to data from Macau's Gaming Inspection and Coordination Bureau. The May figure was 19% more than the last monthly record of 20.51 billion patacas set in April. In the year to May 31, Macau's gambling revenue was up 43%, following a 58% surge for the whole of last year.


Following the data, RBS analyst Philip Tulk said he will need to raise his current forecast for Macau's gambling revenue to grow 28% in 2011. CLSA analyst Huei Suen Ng noted Macau's May revenue alone was equal to almost half the house's $6.5 billion forecast for the Las Vegas Strip's gambling revenue for 2011. .......................................

Analyst Billy Ng said the strong growth was partly due to the May 15 opening of Galaxy Entertainment Group Ltd.'s new casino resort in Macau's Cotai area.

"We see Galaxy Macau driving traffic and injecting new VIP liquidity, with growth in both mass (market) and VIP for the rest of 2011," Mr. Ng wrote.

Gaming Revenue of Macao Soared in April

According to Gaming  Inspection and Coordination Bureau of Macao (DICJ), casino revenue in Macau, the world's biggest gaming market, rose 44.6 percent in April to 20.5 billion patacas ($2.56 billion. $1 = 8.020 Macau Patacas). This is about 4 times the market size of Las Vegas.

Accumulated revenue for the first four months of 2011 rose 43.3 percent 79.0 billion patacas.

From Reuters, Macau's casino industry is booming on robust demand from gamblers from mainland China, which account for the bulk of the territory's visitors. The former Portuguese enclave is the only place in China where mainland Chinese can legally gamble.

Casino stocks that have exposures in Macao include LVS, MPEL, WYNN and MGM.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not own any of the above mentioned stocks in her personal account as of May 4, 2011.

Is Las Vegas Sell-Off a Buying Opportunity?

Shares of the casino operator (LVS) slumped as much as 6% in the morning session on May 3, 2011 as earnings and revenues disappointed, largely due to disappointing results from Marina Bay Sands. Although an EBITDA of $284.5 million  are nothing to sneeze at for a casino that is opened for only a little over a year, investors have high hopes for the gaming industry in Singapore, expecting $325 million EBITDA . Contributing to the shortfall was an unexpectedly low table hold, which is the measure of wins as a percentage of cash and markers deposited into a drop box of a gaming table and also according to the company a very conservative allocation of account receivables.

In the meantime, the company's properties in Macao including Venetian China, Sands China, the Plaza Casino and Four Season Hotel continued to deliver amazing growth in terms of both gaming and hotel revenues. The company's old base in Las Vegas continued to recover after the 2008 financial meltdown.

While Singapore might have failed to excite investors in the first quarter, it is no doubt by far the most promising gaming destination in the world. It generated an EBITDA of $1 billion in its first year of operation in 2010 even without a full-year of operation. How promising? Just think about having the entire Las Vegas strip gaming business split up between only two casinos, Marina Bay Sands and Resort World Sentosa.

In short, the price reaction of LVS after the earnings report was typical of a stock priced for perfection. The long-term prospect of LVS remains intact.  Market capitalization relative to EBITDA  is around 16, compared to 16.83 its closest US competitor, WYNN, is a tad cheaper considering its invaluable asset in Singapore.

That said, this valuation is not completely innocent. Litigation risks remain with LVS. In March 2011, the company received a subpoena from the SEC requesting documentation regarding its compliance with the Foreign Corrupt Practices Act which bars bribes to foreign officials. “Any determination that we have violated the FCPA could have a material adverse effect on our financial condition,” said the company.
Later in April, the company’s subsidiary, Sands China, was investigated by Hong Kong regulators for using inappropriate leverage against Macau government officials with the intention of accelerating the sale of apartments at its Four Seasons Hotel. It is also alleged that the company was spying on the officials with the purpose of collecting negative information to pressure the officials.

"When the smoke clears I am absolutely a thousand percent positive that there won’t be any fire below it.” That was the response given by Sheldon Adelson, the CEO of LVS. On a related note, when subpoenaed for his email, Adelson responded by saying that he does not use email. He is not an email- kind- of guy. If you ask me, that is a red flag.

You may find related articles
3 cases for LVS
Is Macao giving casinos a second wind

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.


Disclosure: The blog author does not own any of the above mentioned stocks in her personal account as of May 4, 2011.

Las Vegas is still out of game

From Bloomberg

"Las Vegas Strip gambling revenue fell 9.6 percent in February, the fourth straight monthly decline as the city faces an uneven recovery after a record slump in the casino industry.

Revenue declined to $513.7 million from $568 million a year earlier, Nevada’s Gaming Control Board said in an e-mail today. Betting fell 6.3 percent in the first two months of 2011 from a year earlier.

Las Vegas is struggling to recover from record declines in gambling and convention revenue. Strip betting proceeds increased 4.1 percent last year, after dropping more than 9 percent in 2008 and 2009. MGM Resorts International (MGM), Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN), and Caesars Entertainment Corp., the four biggest Las Vegas-based casino owners, have said the worst has passed.

Revenue for all Nevada casinos fell 6.8 percent to $881.8 million in February, the board said. Monthly proceeds for Clark County, which includes downtown Las Vegas as well as the Strip, dropped 7 percent to $769.5 million. "

While Las Vegas is struggling, elsewhere in Asia has had gamers rolling in. Gaming Inspection and Coordination Bureau of Macao announced yet another significant year-over-year rise in gaming revenue. Gaming revenue in Macao rose 33%, 47.7% and 48% in January, February, March 2011 respectively.

3 Cases for LVS

There is only one word that can describe the price movement of stock of Las Vegas Sands (LVS), a casino property developer and operator: H-O-T.  The stock price went up by a whopping 200% in the last 12 months, compared to about 12% of the S&P 500 Index.


1. Singapore
The super growth lies with Singapore, a prominent tourism, finance and trade center in Asia that attracts millions of tourists each year.

LVS's owned Marina Bay Sands (MBS), cranked out an EBITDA of $241.6 million in 3rd quarter, 2010 after opening just 6 months ago, about 4 times the EBITDA of LVS’s base in Las Vegas. This is just the beginning. Hongkong-based investment company, CLSA offered very bullish forecast on the growth of the Singapore gaming industry. The industry is expected to grow to a $6 billion industry in 2011 and $9 billion by 2013. Citigroup analysts offered a less upbeat, expecting a $4.5 billion industry in 2011. Currently LVS carries about 34% of the market share.

Between the lower and upper range of estimated industry growth, LVS can take in a revenue between $1.53 billion and $2.04 billion with a midpoint of $1.785 billion in year 2011. LVS is expected to soon take the market share up to about 40%, drawing closer to the only competitor in Singapore, Genting. Given this market share, between the lower and upper range of estimated industry growth, LVS can take in a revenue between $1.8 billion and $2.4 billion with a midpoint of $2.1 billion in year 2011. To put these numbers in context, the old base of LVS in Las Vegas has an annualized revenue of $1.19 billion in 2010. Even without any growth, MBS, just by operating the full year should have about $1.4 billion in revenue (the annualized revenue of MBS in 2010).

2. Macao

Also contributing to significant growth of LVS for years to come is Macao. LVS owns 3 casino properties in Macao, the largest gaming industry in the world now. LVS took in an EBITDA of $334.6 million, about 6 times the EBITDA of LVS’s properties in Las Vegas. LVS’s properties in Macao brought in $3.02 billion in revenue as of the end of 3rd quarter, 2010. Year to date, Macao gaming industry reaped in a total of $19 billion revenue. On a very conservative side, suppose the remaining 2 months have the same results as October (ignoring the positive effects of holiday seasons on the industry), Macao could be a $24billion revenue industry. The industry is expected to grow 30% in the region next year, thus taking the revenue over $30 billion. LVS currently has about 18-19.8% of the market share which translates into $5.4 -6.17 billion revenue in 2011, 34-53% higher than the annualized revenue of LVS in Macao in 2010. This is not the end of the story. LVS is still expanding its business in Macao. One of its new properties in Cotai Strip is expected to open in the third quarter, 2011. [Click on the graphic to enlarge the view]

Source: Gaming Inspection and Coordinaton Bureau of Macao

3. Las Vegas and Economic Recovery


While growth stories in Singapore and Macao go on and on and they will carry a huge chunk of LVS in the near future, LVS’s properties in Las Vegas will benefit from the economic recovery of the United States. While the recovery is slow and uneven, it is on the right track.

In sum, Las Vegas at its current price $52 is 53.6 times and 31.7 times its estimated EPS for 2010 and 2011 respectively. With an expected growth rate between 30-50%, the valuation is attractive for a super-growth stock. In 2007, with Macao business just beginning and without Singapore business, the stock of LVS reached as high as $150. With the growth prospect in Macao and Singapore, it is foreseeable to see the stock price go over $100 in the next 6-12 months.

One caveat lies with the short-term risks of possible correction as the stock has gone straight up almost every other day. Entry at a short-term correction of 10-15% may be a better risk/reward tradeoff.


Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not own LVS in her personal account as of November 9, 2010

Is Macao Giving Casinos a Second Wind?

Casino stocks or otherwise known as gaming stocks tumbled during the financial crisis in 2008 when credit market closed itself to these highly leveraged companies and speculators betted on the collapse of them. Most of these companies lost over 90% of their stock prices over the crash since the peak in 2007.

As the economy is creeping up from the trough, these stocks have been seeing very bullish action this year. LVS, WYNN, MGM, MPEL have seen a rise in stock price as much as 150%, 50%, 10% and 50% respectively.

In addition to the domestic economic recovery, a very large extent of recoupment of losses of these stocks came from their oversea exposure, specifically, Macao for LVS, WYNN, MGM and MPEL and more recently Singapore for LVS. Macao has surpassed Las Vegas to be the largest gaming spot in the world. MPEL and LVS each has three casino properties while WYNN and MGM each has one in Macao. As of September, JP Morgan analysts' channel check showed that SJM carries the largest market share at 31.1% followed by 19.8% of Sands China which is owned by LVS, 10.4% of WYNN Macao owned by WYNN, Melco Crown 16.8% owned by MPEL, Galaxy 12.7% and MGM 9.2%.

According to Macao Gaming Inspection and Coordination Bureau, the gross gaming revenue has recovered sharply from 2009, with each month posting significant increase this year. As of September 2010, the gaming revenue has accumulated to as much as 133.2 billion MOP (equivalent to $16.4 billion).

	Monthly Gross Revenue
	2010	2009	Variance
Jan	13,937	8,575	62.50%
Feb	13,445	7,912	69.90%
Mar	13,569	9,531	42.40%
Apr	14,186	8,340	70.10%
May	17,075	8,799	94.10%
Jun	13,642	8,269	65.00%
Jul	16,310	9,570	70.40%
Aug	15,773	11,268	40.00%
Sept	15,302	10,943	39.80%

No doubt Macao will be the most important source of growth for gaming companies in the world. The million- dollar-question for shareholders will be how much this growth is worth in terms of share prices?

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not own any of the above mentioned stocks in her personal account as of October 18, 2010.