Tag Archives: gaming

Should You Bet On Casino ETFs After Mixed Earnings?

The overall casino industry is caught in a spiralling slowdown for quite some time now. While Las Vegas was a drag earlier and Macau was an outperformer, the backdrop took a turn in the last few quarters, making Macau a culprit. Notably, Macau – a Chinese territory – is one of the largest casino gaming destinations in the world. Credit crunch issues in mainland China, check on illegal money transfers especially in VIP gaming, constraints on visa and last but not the least, a broad-based slowdown in China were responsible for this drop-off (read: Will Troubles in Macau Spoil Gaming ETF Investments? ). Though the situation has improved, as evident from mixed Q3 earnings from casino bellwethers, there is still room for improvement. Despite the ‘golden week’, gross gaming revenues in Macau plummeted 28.4% year over year to $2.51 billion in October. In China, the golden week is a seven-day long holiday period starting from October 1, when people party and splurge. However, the current decline, which marks the seventeenth successive monthly and fourteenth consecutive double-digit decline, was what analysts had expected. The outright negative mood has weighed on the casino gaming ETF Market Vectors Gaming ETF (NYSEARCA: BJK ), which is down 11.5% so far this year (as of November 4, 2015). However, mixed earnings gave a considerable push to the fund in the last one month, when it added about 5.7%. Given this, investors might be interested in the casino earnings details and the potential impact on the casino ETF ahead. Q3 Earnings in Detail MGM Resorts International (NYSE: MGM ) posted third-quarter 2015 earnings of 15 cents per share on October 27. Earnings surpassed the Zacks Consensus Estimate of 3 cents and reversed the year-ago loss of 2 cents. Revenues were down 8.2% to $2.28 billon and fell short of the Zacks Consensus Estimate by 0.6%. The downside reflects a significant decline in revenues from MGM China. VIP gambling continues to be a drag in China. However, net revenue at wholly owned domestic resorts was up 3.7%. Casino revenues from wholly owned domestic resorts went up 4%. Along with this, MGM Resorts announced a plan to create a controlled real estate investment trust (REIT) that will be named MGM Growth Properties LLC. The transaction is expected to be completed in the first quarter of 2016. Thanks to the earnings beat plus restructuring effort, MGM shares gained about 10.3% in the last five trading sessions (as of November 4, 2015). On October 21, Las Vegas Sands Corp. (NYSE: LVS ) fell shy of the Zacks Consensus Estimate on revenues but surpassed the same on earnings. Cost containment aided earnings. Also, the company declared a 10.8% increase in dividend for 2016. Earnings of 66 cents per share fell 21% year over year hurt by an 18% decline in revenues. Earnings beat our estimate by 4.8% while revenues of $2.89 billion fell short of the Zacks Consensus Estimate of $2.97 billion. Gross gaming revenues in Macau declined in double digits in all three months of the quarter. LVS stock was up about 6.1% since it reported earnings (as of November 4, 2015). On October 15, Wynn Resorts Ltd. (NASDAQ: WYNN ) posted mixed third-quarter 2015 results. Adjusted earnings of 86 cents dropped 56% and missed the Zacks Consensus Estimate by 14.7%. Revenues of $996.3 million missed the consensus mark of $1.03 billion by 3.4% and slipped 27% year over year, owing to a choppy performance both Macau and Las Vegas. WYNN resorts lost 1.2% since reporting earnings (as of November 4, 2015) (see all the Consumer Discretionary ETFs here ). Casino ETF: Buy on the Value? Investors should note that casino stocks are extremely cheap in valuation after undergoing a steep sell-off. The fund is presently trading at $34.04 per share which is 24.6% down from its 52-week high. Moreover, though Macau revenues are still lackluster, in-line data and signs of stability in companies’ earnings point to a revival, albeit slow. Notably, all three companies mentioned above have found a place in the top 10 holdings of this $27.6 million fund with a considerable share. Las Vegas Sands and Sands China together have about 14% exposure in BJK. MGM Resorts International has 4% weight in the fund while Wynn Resorts Ltd accounts for more than 6% of BJK. The product charges 65 bps in fees. The fund lost over 20% in the last one year (as of November 4, 2015). Link to the original post on Zacks.com

Will The Casino ETF Finally Hit Jackpot?

The casino gaming industry has seen much suffering over the last one year. Normally, large casinos hail from two cities – Las Vegas and Macau. While Las Vegas was a laggard a few years back on recession in the U.S. and Macau was a star performer, the story changed totally in a few quarters on hard landing fears in China. For more than a year now, Macau has been a pain for the casino operators as this Chinese region is the operating Mecca of leading casino operators like Wynn Resorts Ltd. (NASDAQ: WYNN ), MGM Resorts International (NYSE: MGM ) and Las Vegas Sands Corp (NYSE: LVS ). Notably, Macau is one of the largest casino gaming destinations in the world. Credit crunch issues in mainland China, check on illegal money transfers especially in VIP gaming and a broad-based slowdown in China are responsible for the latest drop-off in the casino industry. Though Las Vegas is gaining ground on an improving U.S. economy, a protracted upheaval in Macau hit hard the casino stocks and the related ETF. For the first eight months of 2015, gross gaming revenues declined 36.5% in the region. In August itself, revenues were off 35.5%. Turnaround Round the Corner? Though the decline in August was the fifteenth successive monthly decline and the twelfth consecutive double-digit decline, gaming kicked off on a slightly positive note in September. As per barrons.com , average daily table revenue in Macau’s casinos was 605 million Hong Kong dollars in the first six days of September. The weekly figure bettered the average August revenue of HK$550 million. Moreover, investors should note that though August appeared downbeat, mass market gaming showed improvement. Thanks to the crackdown on the VIP segment, most casino operators focused on the mass market segment, reduced minimum bets and shifted more tables from VIP to the mass market division. To add to this, to save the sector, the government is resorting to several measures. Per the recent media reports, the government would reportedly allow smoking in Macau casinos under certain conditions. Meanwhile, per a new norm implemented by the government from Jul 1, mainland China passport holders transiting through Macau can stay there for two more days and could gain entry into the city within 30 days instead of 60 days previously. So, the easing of tourist restrictions in Macau and the possibility of relaxation in bans on gaming-floor smoking rooms will rev up Macau casino revenues. Casino ETF: Buy on the Cheap? The outright negative mood so far weighed on the casino gaming ETF the Market Vectors Gaming ETF (NYSEARCA: BJK ) which is down about 17% so far this year (as of September 9, 2015). The fund lost about 30% in the last one-year and two-year frames, while the fund added over 1.5% in the last five days (as of September 9, 2015). Moreover, investors should note that casino stocks are extremely cheap in valuation after undergoing a steep sell-off. All these paint a brighter outlook for the casino ETF in the days to come. Granted, there is no short of economic bottlenecks yet slightly positive Macau vibes are in the air now. So those who are looking for a beaten-down space which might turn around in the coming days can try out their luck with BJK. BJK in Focus The fund looks to track the Market Vectors Global Gaming Index and provides investors a direct exposure to the casino gaming market. The product has so far been overlooked by investors as is evident from its paltry volume of about 30,000 shares daily. The fund has so far attracted $25.3 million in assets, invested in 45 holdings. The product is expensive as it charges 65 bps in fees per year which is on the higher end of the expense ratios of the consumer discretionary ETFs. The fund has now slid into an oversold territory as indicated by its relative strength index of 38.23 times. The fund currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Link to the original post on Zacks.com