Weekly Casino Notes: Visitor Restriction In Macau, Mayweather and Pacquiao Boxing Match And More

The past week was eventful for casino operators as data from Macau showed much weaker performance during the Chinese New Year holiday. Macau gross gaming revenues can drop by as much as 50% in February. ^[1] The official monthly data will be released this week. Moreover, the government may consider imposing restrictions on visitors from Mainland China to Macau amid the growing complaints from residents of the city. ^[2] This could put further pressure on gaming companies who have been busy expanding their non-gaming avenues to lure more tourists. Situation in Macau remains fragile and it is difficult to comment on exactly how long will it take for the recovery to kick in the region. In an another development, MGM Grand will host a boxing event, also termed as “fight of the century” between Floyd Mayweather and Manny Pacquiao and the casino operator will surely benefit from this,  given the massive size of the event. On that note, we discuss below some of the key developments in the casino industry over the past week or so.

Las Vegas Sands

Las Vegas Sands (NYSE:LVS) as well as other casino stocks reacted to the news on restriction of visitors and poor gaming performance during the holiday season. The company’s stock fell 6% since past week and 30% over the last one year amid Beijing’s anti-graft push. It must be noted that Las Vegas Sands currently gets 80% of all the non-gaming income out of 35 Casinos in Macau and any restriction on visitation from Mainland China is likely to weigh on its non-gaming business. While this is something which may not happen immediately, any move from the government in that direction will not go well with the casino operators in the region.

We estimate gross revenues of over $19 billion for Las Vegas Sands in 2015, with EPS of $3.96, which is higher than the market consensus of $3.24, compiled by Thomson Reuters. We currently have a $74 price estimate for Las Vegas Sands, which we will soon update to incorporate the latest earnings.

Wynn Resorts

Wynn Resorts (NASDAQ:WYNN) stock was worst hit with the recent news flow from Macau and the stock plunged 10% past week. Looking at the past one year, the stock is down 38%. Unlike Las Vegas Sands, which has diversified its operations in the Nevada, Pennsylvania, Singapore and Macau, Wynn Resorts operates only from Las Vegas and Macau. Moreover, Macau VIP gaming has been the force driving the company’s casino operations over the last few years. However, given the government’s crackdown on corruption, it is VIP gaming that is the worst hit. While Wynn has seen a significant growth in its mass-market gaming in the recent past, it has been unable to offset the losses on the VIP side. Meanwhile, the company is busy developing a new casino resort, Wynn Palace, which is a $4 billion integrated resort in Cotai and will offer more than 2,000 hotel rooms, 500 gaming tables and several slot machines. The resort is scheduled to open in the first half of 2016 and will enhance Wynn’s capacity in the region.

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 latest earnings.

MGM Resorts

MGM Resorts (NYSE:MGM) stock relatively performed better and fell only 4% this week. However, it also declined close to 20% over the last one year. In a development last week, a boxing match is scheduled for May 2nd at MGM Grand in Las Vegas. MGM is poised to benefit from this boxing match between Floyd Mayweather and Manny Pacquiao. It must be noted that this is a massive event and is also termed as “fight of the century” and MGM may fetch more than $40 million only in ticket sales. While the ticket prices were anywhere between $1000 and $5000 depending on the seating, MGM will largely benefit from its hotel operations such as room sales and food & beverage. The company will likely offer ringside tickets only to the customers with $250,000 credit line. ^[3]

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 $0.23-$1.01 , compiled by Thomson Reuters. We currently have a $24 price estimate for MGM Resorts, which we will soon update to incorporate the latest earnings.

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1. Macau February gaming revenue set to drop by 50pc, South China Morning Post, Feb 25, 2015 [↩]
2. Macau casinos hit lunar new year cold streak, Financial Times, Feb 25, 2015 [↩]
3. Mayweather Vs. Pacquiao Ticket Pricing Goes Berserk, Forbes, Feb 24, 2015 [↩]