Category Archives: Casinos

June 2013 Macau gambling statistics–no sign of slowdown

July 10, 2013 By in Asian economic development, Casinos, China, economics, Entertainment, Hong Kong, Industry Analysis, Recent Market Action Tags: , , , , , , , , Leave a comment

Last week the Macau Gaming Inspection and Coordination Bureau (DICJ) posted on its website the total that casinos in the SAR won from gamblers during June 2013.  The figures, in millions of Macau patacas, are:

Monthly Gross Revenue from Games of Fortune in 2013 and 2012
Monthly Gross Revenue Accumulated Gross Revenue
2013 2012 Variance 2013 2012 Variance
Jan 26,864 25,040 +7.3% 26,864 25,040 +7.3%
Feb 27,084 24,286 +11.5% 53,948 49,325 +9.4%
Mar 31,336 24,989 +25.4% 85,284 74,314 +14.8%
Apr 28,305 25,003 +13.2% 113,589 99,317 +14.4%
May 29,589 26,078 +13.5% 143,178 125,395 +14.2%
Jun 28,269 23,334 +21.1% 171,447 148,729 +15.3%

Source: Macau DICJ

Of course, we have to be careful not to read too much into one month.  The situation is also complicated because the gambling market in the SAR is new enough that it’s difficult to know what the seasonal patterns in visitation may be–that is, whether June is usually a big month for gamblers or a weak one.  That factor is being covered up by the overall mad rush by increasing numbers of Chinese citizens to the baccarat tables.

In addition, we should note that the apparent acceleration in year-on-year revenue comparisons that we see in June is due to the effects of last year’s economic slowdown in the 2012 numbers–in advance of the November leadership change in the Communist Party–rather than a surge in revenue last month.

Still, the past four months have been the biggest in the Macau gaming market’s history.  June appears every bit as strong as the months that preceded it.  Reports I’ve read suggest that so far July is stronger than June.

This is good news.

That hasn’t helped the Macau gambling stocks, which have sold off in sympathy with the Shanghai Composite over the past six weeks or so.  Chinese stocks are falling on fears about the credit crunch I described yesterday.

The most attractive Macau gambling stocks right now, in my view, are Galaxy Entertainment and Sands China (I own Galaxy and LVS, Sands China’s US parent).  But I’m not in any rush to add to either position until I see more data on how the credit situation will unfold.  (There’s also the issue of a potential crackdown by Beijing on money laundering in Macau.  But I think this is a problem with the pre-SAR casinos and will have little effect on the companies invited into the market by the current Macau government.  In any event, in my view, stricter regulation would be another long-term plus for Macau’s development into an Asian Las Vegas.)

Macau Gambling: May 2013 Market Results

June 5, 2013 By in Casinos, China, Entertainment, Hong Kong, Industry Analysis, Stock ideas Tags: , , , , , , , , , , , Leave a comment

The day before yesterday, the Macau Gaming Inspection and Coordination Bureau published the aggregate amount won from patrons by the casino industry in the SAR.  Results were as follows, in millions of MOP (Macanese patacas):

Monthly Gross Revenue from Games of Fortune in 2013 and 2012
Monthly Gross Revenue Accumulated Gross Revenue
2013 2012 Variance 2013 2012 Variance
Jan 26,864 25,040 +7.3% 26,864 25,040 +7.3%
Feb 27,084 24,286 +11.5% 53,948 49,325 +9.4%
Mar 31,336 24,989 +25.4% 85,284 74,314 +14.8%
Apr 28,305 25,003 +13.2% 113,589 99,317 +14.4%
May 29,589 26,078 +13.5% 143,178 125,395 +14.2%

Source: Macau Gaming Inspection and Coordination Bureau (DICJ)

At MOP 29,6 billion (US$3.7 billion), the monthly gaming win for May was the second-highest on record, exceeded only by the MOP 31.3 billion posted during the holiday season in March.  It was also a 13.5% year-on-year gain.  The strong–but not blowout–comparison came against the last healthy month of 2012. From June onward, a combination of economic slowdown and the desire not to attract much attention in advance of the change in leadership of the Chinese Communist Party caused a stagnation in market win until last December.

what to look for in market development

1.  Although what will likely turn out to be a 15% yoy growth rate for 2013 is nothing to sneeze at, it would no longer be the gold rush we’ve come to know and love in Macau.

Normally, I’d guess that maturity for Macau gaming will be 10% annual growth–because that would basically in line with my guess at China’s trend nominal GDP expansion rate.  But since China is attempting a macroeconomic transition away from low value-added manufacturing based on large wage increases rather than currency appreciation, I want to pencil in a higher number.  I’m just not sure what it should be.

2.  In addition, I don’t think Macau is mature quite yet.  Better transportation links will allow the SAR to reach progressively deeper into the mainland for customers.

3. Macau is unique in my experience, because it is dominated by high stakes baccarat played by extremely wealthy, highly skilled gamblers who don’t lose a large percentage of their bets and who have a large chunk of their losses rebated back to them as the price of their patronage.

In contrast, upper income, but not insanely wealthy, gamblers in Las Vegas have percentage losses on their bets of about 10x what the high rollers do.  So the broadening of the market to include more of the first group may bring profits to casinos that are very much higher than Hong Kong analysts now expect.

4.  Market momentum is moving toward Cotai.  That’s the newest area.  It’s also where the new capacity is opening. Galaxy Entertainment and Sands China are the prime beneficiaries.

5.  Former also-rans are now leading the pack.  Operators like Wynn Macau, who have been the most desirable destinations as well as efficient since opening in wringing every last avo (1/100 of  pataca) from their plant and equipment, will stagnate in gaming operations until they can open new capacity.

5.  Non-gambling offerings–restaurants, shows, retail–are in their infancy in Macau.  In pre-Great Recession Las Vegas, they brought in half the industry’s profits.  If Macau follows suit–and I don’t see why it shouldn’t–this could be an enormous positive surprise to Hong Kong investors.  Wynn Macau and Sands China will likely be the stars in this arena.

a strong 1Q13 from Las Vegas Sands (LVS)

May 2, 2013 By in Casinos, earnings conference calls, Entertainment, Industry Analysis, Stock ideas Tags: , , , , , , 1 Comment

the report

After yesterday’s close, LVS reported 1Q13 earnings results.  Revenues came in at a record $3.3 billion, up 19.5% year-on-year.  Earnings per share were $.71, up a penny from the 1Q12 EPS, but $.04 higher than the Wall Street analysts’ consensus.

The results are actually much stronger than the raw numbers would suggest.  As regular readers will already know, casinos count as revenue only the amount that patrons lose when they gamble, not the amount they bet.  Over long periods of time, gamblers losses adhere to highly predictable patterns.  Over short periods, however, they can fluctuate a lot from the “house advantage,” based mostly on random “luck” factors.  To get a clear picture of how a casino company is doing, we have to adjust for this.

In LVS’s case, luck made 1Q12 revenue (and operating profit) look $177 million better than it should have; luck made 1Q13 revenue look $25 million worse.  Adjusted for these differences, income for LVS was up by about 30%.

why so good?

Macau

–Chinese gamblers elected to keep low profiles during the recently completed leadership change in Beijing.  Now they’re returning to the baccarat tables in Macau.

–better transportation and streamlined border controls mean more visitors can easily reach Macau

–unlike, say, WYNN, LVS has ample spare capacity to accommodate new customers, so it’s benefiting disproportionately from the market upturn.

Singapore

–mainland Chinese gamblers, whose patronage of the Marina Bay Sands has been more highly economically sensitive than their visits to Macau, are coming back

–so too, gamblers from Indonesia

US

–Las Vegas was flattish, with strength in non-casino operations

–Bethlehem, PA continues to perk along

Asian retail mall operations

In response to an analyst question about why LVS had not yet sold any of its Macau or Singapore retail operations as previously planned, management said the businesses were still growing much more quickly than anticipated.  The company thinks the Asian malls may ultimately be worth $8 billion – $10 billion, or around 20% of the company’s market cap.

For the first time, LVS is providing segment detail about these operations.   1Q13 operating profits were $68 million, up 23.4% yoy.

a special dividend?

Management also said it’s considering borrowing in the US, à la AAPL, to fund either a special dividend or a share buyback.

my take

LVS isn’t wart-free. It’s involved in a number of lawsuits.  And its long-time auditor has just parted ways.  Still, by my calculations, the Asian operations explain more than the entire market cap of LVS.  I don’t think either Hong Kong or Wall Street has appreciated the potential of the Asian retail malls.  LVS is the only way to get exposure to Marina Bay Sands and the easiest way to participate in Sands China.  I’m not in a great rush to buy more today but I’m very happy to hold.

Macau gambling and the Chinese economy

April 3, 2013 By in Asian economic development, Casinos, China, Current Market Thoughts, economics, Entertainment, Industry Analysis, Recent Market Action Tags: , , , , , , , , 1 Comment

March 2013 Macau gaming results

The Macau Gaming Inspection and Coordination Bureau has just released its report on the gambling take of casinos in the SAR during March 2013.  The figure is eye-popping.  Last month gamblers exited Macau;s gambling palaces with their wallets lighter by 31.3 billion patacas (US$3.9 billion).

how good is that?

–P31.3 billion is an all-time monthly record for casino win in Macau.

–It represents a 25.4% improvement over the comparable period of 2012.

–The year-on-year gain is the highest for the SAR since January 2012, after which the Chinese economy–and the Macau casinos–began to falter.

–March is also up 15%+ vs. February, which runs contrary to Macau’s (admittedly short) pattern of flattish month-on-month comparisons in the first quarter.

winners?

This is great for the Macau casino industry, and especially for the firms that have recently added capacity, mostly in Cotai, to accommodate extra gamblers.

At the same time, the Macau gambling results give us a good idea about how well-to-do Chinese citizens feel about their economy, their personal earning prospects and their degree of comfort with the newly-installed government.  It’s a solid thumbs-up on all counts.

The figures also suggest that in its newly-launched anti-corruption, anti-ostentation campaign, Beijing is aiming at much bigger fish than high-roller casino patrons.

the Lim family of Malaysia is bringing Resorts World to Las Vegas

March 7, 2013 By in Casinos, Entertainment, Industry Analysis Tags: , , , , , , , Leave a comment

Earlier this week, the Lim-controlled Genting Group and the Nevada governor held a press conference to announce that:

–Genting has agreed to pay $350 million to the Boyd Gaming Group for an 87-acre site which contains the skeleton of a partially completed casino resort, and

–Genting will build a large Chinese-themed casino/hotel complex there under its Resorts World brand, eventually spending up to $7 billion on the project.  Construction will begin next year, with the first stage possibly to open in 2016.

Several observations:

1.  Las Vegas doesn’t appear to have been the Lims’ first choice.  Over the past couple of years, Genting has been very active in lobbying, without success so far, to build similar projects in Florida and New York City.

2.  Reinvesting in Genting’s home country, Malaysia, is not a prudent option, in my view.  For example, Malaysia’s bumiputra program set up in the 1970s required, among other things, that ethnic Chinese-controlled companies like Genting sell large minority stakes at bargain-basement prices to ethnic Malays.  Also, the country froze foreigners’ assets for an extended period during Asian financial crisis of the late 1990s.

To be clear, I don’t know Malaysia well any more.  And I haven’t studied Genting closely for a long time.  But it strikes me that Genting may well be willing to accept lower returns on investments in the US in order to have assets located in an area where they may be more secure.

3.  I think the new casino complex will change the dynamics of the Las Vegas gambling market in a number of ways:

–the new complex will enhance Las Vegas as a tourist destination, create jobs and remove an eyesore (one reason WYNN built its Beach Club the way it did was to obscure the view of the (really ugly) Boyd site).

–it will shift the center of mass of the Las Vegas Strip north, toward WYNN and LVS properties and away from MGM’s.

–when it opens, Resorts World-LV will set a cap on hotel room rates in the market.  That will only happen three years from now, however, when rates could be, say, 20% higher than they are today.

–it’s possible that Genting will create some first-time business for Las Vegas from Asia.  But I think the lion’s share of its revenues will come from people who now patronize existing casinos.  As such, it won’t be great for any of the incumbent operators.  Worst hurt will be those catering to the mid-market, Resort World’s niche.  I think this will be especially true for non-branded casinos, and those in downtown, the southern part of the Strip or off the Strip on parallel streets.

4.  I haven’t analysed Genting’s Singapore casino.  My impression is, though, that the company is a very astute operator of family-oriented entertainment, but only an average casino owner.  Its Las Vegas project will be interesting to watch.