Casino Notes: Macau Gaming Revenues Plunge 37% In May

June 2nd, 2015 by Trefis Team
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The Macau government released the May gaming data, which came on expected lines with a 37% drop in gross gaming revenues. [1] This marks the 12th straight month of revenue decline in the world’s largest gambling hub. Nevada gaming numbers for the month of April were also released recently and the Las Vegas Strip saw an 8% uptick in gaming revenues as compared to the prior year period. [2] On that note, we discuss below these developments in the casino industry.

Las Vegas Sands

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Las Vegas Sands’ (NYSE:LVS) casino operations are hurt with the recent decline in Macau gaming. Gross gaming revenues declined double-digit for the eight consecutive month in May to $2.5 billion. This can be attributed to the ongoing graft crackdown, which has kept many players away from Macau. The company’s stock fell 2% past week and hit a fresh 52-week low price of $49.57 on May 26th. An uptick has been anticipated for months and yet we wonder when the casinos will see gaming growth return in Macau. This suggests that there is room for stock price movement depending on the amplitude and the timing of any recovery in gaming volume. While the timing is uncertain the amplitude could well be steep.  We believe that, ultimately, growth in both Mainland China visitors and China’s personal disposable income will spur a recovery in VIP as well as mass-market gaming in Macau, which in turn will catalyze Las Vegas Sands’ stock price movement (see – What Factors Can Drive Las Vegas Sands’ Stock Price?).

We estimate gross revenues of over $14.50 billion for Las Vegas Sands in 2015, with EPS of $3.09, which is slightly higher than the market consensus of $2.47-$3.05, compiled by Thomson Reuters. We currently have a $60 price estimate for Las Vegas Sands, which is around 20% ahead of the current market price of $50.

Wynn Resorts

Wynn Resorts’ (NASDAQ:WYNN) stock price plunged 6% past week and also hit a fresh 52-week low of $97.89. The company’s exposure to Macau VIP gaming is higher as compared to Las Vegas Sands or MGM Resorts. A wave of high-profile arrests of senior Chinese officials has hurt the VIP business of Macau casinos. Visa transit restrictions, a smoking ban and the weakening economy added to the woes for casino operators in the region. Moreover, Beijing has now implemented much stricter smoking restrictions in the city. Smoking is now banned in all public places and this could have an impact on Macau, where smoking lounges are on the main casino floors. [1]

We estimate revenues of over $5 billion for Wynn Resorts in 2015, with EPS of $4.38, which is in line with the market consensus of $2.98-$4.39, compiled by Thomson Reuters. We currently have a $139 price estimate for Wynn Resorts, which is around 40% ahead of the current market price.

MGM Resorts

Unlike Las Vegas Sands and Wynn Resorts, MGM Resorts (NYSE:MGM) derives most of its value from its U.S. operations. While Macau continues to see lower gaming revenues, the Las Vegas Strip saw an 8% uptick in gaming revenues for the month of April. The positive data for Nevada came after 2 months of declines and this should help the company’s domestic casinos in the second quarter. However, MGM’s stock price was down 2% past week amid continued concerns over Macau. Last week, in its annual meeting, MGM’s shareholders voted to re-elect the existing director slate as opposed to the one proposed by the investment management firm, Lands & Buildings. The group earlier stated that the company’s stock price could double if it were to spin off its real estate assets into a real estate investment trust. However, MGM had responded to it stating that the proposal was seriously flawed.

We estimate gross revenues of about $10 billion for MGM Resorts in 2015, with EPS of $0.61 which is in line with the market consensus of $0.21-$0.62 , compiled by Thomson Reuters. We currently have a $23 price estimate for MGM Resorts, which is more than 15% ahead of the current market price.

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Notes:
  1. Macau gaming revenue dips 37 percent, 12th straight monthly drop, Las Vegas Review Journal, June 1, 2015 [↩] [↩]
  2. Strip’s best April since ‘08 helps reverse statewide gaming slide, Las Vegas Review Journal, May 29, 2015 [↩]