Casino Notes: Macau June Gaming Revenues Plunge 36%

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Casino stocks surged last week amid relaxed visitation rules in Macau. However, monthly gross gaming revenues were again down 36% for the month of June. Back in the U.S., the Nevada Gaming Control Board recently released data for May gaming revenues, which were up over 3% statewide and 1.3% at the Strip as compared to the prior year period. [1] While the headline figures appear to be low, the numbers are actually very strong given the tough comparison to the prior year period, which saw over 8% jump statewide and over 17% growth at the Strip due to unusual hold levels. On that note, we discuss below some of the key developments in the casino industry over the past week or so.

MGM Resorts

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MGM Resorts (NYSE:MGM) derives most of its revenues from its U.S. operations and has a limited exposure to Macau gaming. Accordingly, the movement in the company’s stock price was comparatively lower and was up only 1% last week. The good news for MGM though is an uptick in Nevada gaming revenues. The Las Vegas Strip saw over 1% growth in gaming revenues for the month of June despite a tough comparison with the prior year period. [1] The previous month’s data was also good, and this should help the company’s domestic casinos in the second quarter.

In another development, MGM is interested in building a $1 billion casino resort in Atlanta, according to a media report. [2] While the casinos are not legalized in Georgia, a constitutional amendment was introduced this year asking the voters to authorize a limited number of casino resorts across the state. It is a long road ahead for MGM if it does plan to build a casino in Atlanta. However, it would make sense for it to diversify into other regions as more states are legalizing casinos and MGM could reduce its reliance on the Las Vegas Strip.

We estimate gross revenues of about $10.45 billion for MGM Resorts in 2015, with EPS of $0.33 which is below the mid-point of the market consensus of $0.10-$1.01 as compiled by Thomson Reuters. We currently have a $27 price estimate for MGM Resorts, which is more than 40% ahead of the current market price. It must be noted that MGM’s stock price has plunged around 15% in the last three months amid uncertainties pertaining to Macau.

Las Vegas Sands

Las Vegas Sands’ (NYSE:LVS) stock was up over 5% last week as the Chinese government relaxed the visitation rules to Macau. The Mainland Chinese residents can now visit Macau twice per month rather than twice per two-month period and the maximum length of any one stay has also increased from five days to seven days. [3] These supportive measures from Beijing for Macau sent out a positive signal to the investors. We maintain our bullish stand on Macau casinos and continue to believe that growth in Mainland China visitors to Macau and China’s personal disposable income will drive gross gaming revenue growth in Macau (see –What Factors Can Drive Las Vegas Sands’ Stock Price?).

We estimate gross revenues of over $15 billion for Las Vegas Sands in 2015, with EPS of $3.52, which is higher than the market consensus of $3.13, compiled by Thomson Reuters. We currently have a $60 price estimate for Las Vegas Sands, which is around 10% higher than the current market price.

Wynn Resorts

Wynn Resorts (NASDAQ:WYNN) stock was up also over 7% last week. The Macau gaming data for the last nine days of June showed an uptick. [2] We are eager to learn if this trend sustains in the coming months and marks the reversal of the downfall seen in the past 13 months.

Wynn’s domestic casino operations have been trending well despite uneven trends in Nevada gaming, and we believe that the company’s new casino project in Everett, Massachusetts, will significantly boost its domestic gaming operations in the coming years (see – How Are Wynn Resorts’ Domestic Casino Operations Trending?)

We estimate revenues of over $5.65 billion for Wynn Resorts in 2015, with EPS of $6.93, which is above the mid-point of the market consensus of $4.58-$7.37, compiled by Thomson Reuters. We currently have a $139 price estimate for Wynn Resorts, which is more than 30% ahead of the current market price.

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Notes:
  1. Nevada casinos collect $1B in gaming revenue during May, up 3.3 percent, Las Vegas Review Journal, June 26, 2015 [] []
  2. MGM Resorts Eyeing Atlanta for Casino, Atlanta Business Chronicle, July 2, 2015 [] []
  3. Macau gaming revenue falls again, but visitation rules eased, Las Vegas Review Journal, July 1, 2015 []