Weekly Casino Notes: Macau Gaming Data, Wynn Earnings And More

February 6th, 2015 by Trefis Team
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The past week was eventful for casino operators after the January gaming data was released by the Macau government. Macau witnessed continued decline in gaming and gross revenue fell 17%. [1] However, this figure is better than the 30% decline seen in December. Wynn Resorts reported its earnings this week and it came out lower than expected. On a separate note, MGM inked a deal with GTECH for mobile betting technology. On that note, we discuss below some key developments in the casino industry.

Wynn Resorts

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Wynn Resorts (NASDAQ:WYNN) recently reported its Q4 2014 earnings. A decline in Macau gaming weighed over the company’s performance and China revenues declined 32% to $761 million while the EBITDA was down 36% to $241 million. The overall revenues were down 25% to $1.14 billion and the company reported earnings of $1.20 per share as compared to $2.27 earnings per share seen in the prior year quarter. [2] Wynn posted lower than expected earnings and a massive decline in both VIP as well as mass-market gaming in Macau. The company’s stock price fell over 6% in trading after the earnings were released (See – Wynn’s Earnings Down Nearly 50% Amid A Slowdown In Macau).

We estimate gross revenues of over $7 billion for Wynn Resorts in 2015, with EPS of $9.05, which is notably higher than the market consensus of $7.18, compiled by Thomson Reuters. We currently have a $186 price estimate for Wynn Resorts, which we will soon update to incorporate the fourth quarter earnings.

Las Vegas Sands

Las Vegas Sands’ (NYSE:LVS) Chairman, Sheldon Adelson, in an event this week stated that the slowdown in Macau is cyclical and will pass after the government’s crackdown is over. He said that VIPs are staying low and don’t want themselves to be visible in the ongoing crackdown. [3] It must be noted that lower VIP gaming has largely contributed to the recent decline in Macau. VIP gaming was down 29% in the fourth quarter of 2014 and 11% for the full year. [4] The impact of slowdown was also visible on Las Vegas Sands’ earnings, which were released in the previous week (see – Las Vegas Sands’ China Operations Decline After A Slowdown In Macau; Earnings Jump 28% Over Lower Costs). Fortunately, for Las Vegas Sands, VIP business accounts for only 17% of Macau profits while mass-market gaming and non-gaming sources make up the rest. This is why the hit of slowdown on Las Vegas Sands earnings was lower as compared to Wynn, for which Macau VIP gaming accounts for 35% of its value, according to our estimates.

We estimate gross revenues of over $19 billion for Las Vegas Sands in 2015, with EPS of $3.96, which is in line with the market consensus of $3.05-$4.03, compiled by Thomson Reuters. We currently have a $74 price estimate for Las Vegas Sands, which will soon update to incorporate the recent quarterly earnings.

 

MGM Resorts

MGM Resorts (NYSE:MGM) takes the gambling digital and has inked a deal with GTECH for a mobile wagering system in 12 of its casinos in Nevada. With this new technology, MGM’s customers will be able to place the bets on their mobile device from anywhere in Nevada, thereby increasing volume without requiring more gaming space. This technology is already being used in Nevada and aided a 12% growth in sports wagering last year. [5]

We estimate gross revenues of about $12 billion for MGM Resorts in 2015, with EPS of $0.68, which is in line with the market consensus of $0.31-$1.0124, compiled by Thomson Reuters. We currently have a $24 price estimate for MGM Resorts, which is more than 15% ahead of the current market price.

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Notes:
  1. Macau casino revenues down 17 percent in January as China slowdown, corruption probe deepen, Fox News, Feb 2, 2015 [↩]
  2. Wynn Resorts’ SEC Filings [↩]
  3. Macau’s revenue downturn cyclical: Adelson, GGR Asia, Feb 4, 2015 [↩]
  4. Rising cost of Macau casino sales a focus for analysts, GGR Asia, Feb 6, 2015 [↩]
  5. MGM Resorts to launch mobile wagering application in Nevada, Review Journal, Feb 2, 2015 [↩]