Gambling Stock Roundup: Macau Revenues Fall Again, Las Vegas Sands To Resume Cotai Strip Resort Construction

The last two weeks of 2014 remained quite subdued for the gambling industry. Gambling revenues in Macau for the month of December plunged as expected. Revenues for 2014 declined as well – marking the first decline on an annual basis since 2001.

However, the decline was lower than expected. Meanwhile, Nevada gambling revenues for the month of November remained almost flat year over year. Barring the Las Vegas Strip that posted a decline, all other regions witnessed growth.

In one other development, the proposed acquisition of Caesars Acquisition Co. CACQ and Caesars Entertainment Corp. CZR is being investigated by Robbins Arroyo LLP to analyze if it is in the best interest of Caesars Acquisition. Meanwhile, Sands China Ltd. – the majority owned subsidiary of Las Vegas Sands Corp. LVS – has received approval from the Macau government to complete the construction of its Paris-themed integrated resort. After an accident, the construction of this resort was suspended in Jun 2014. (Read last development: Gambling Stock Round Up for Dec 15, 2014)

Recap of the Week's Important Stories:

1.    Not surprisingly, Macau gross gaming revenues declined at a double digit rate yet again. According to Macau's Gaming Inspection and Coordination Bureau, revenues for the month of December plunged 30% – marking the seventh consecutive monthly decline this year and also the highest. After declining in single digits for three consecutive months beginning June, revenues declined 11.7%, 23.2%, 19.6% in Sep, Oct and Nov 2014, respectively.

With this steep fall, gambling revenues have declined 2.6% year over year in 2014. Per analysts, gambling revenues in Macau, the only destination in China where gambling is legal, have fallen annually for the first time since casinos were liberalized in 2001.

2.    After declining for three months in a row, Nevada gambling revenues for the month of November remained almost flat year over year at $876.0 million, according to the Nevada Gaming Control Board. Revenues increased in all the regions of Nevada, except for the Las Vegas Strip which posted a decline.

Revenues in Nevada had dropped 4.3%, 6% and 3.7% in Oct, Sep and Aug 2014, respectively. The Las Vegas Strip that accounts for more than half of Nevada's total revenue fell 4%, marking the fourth consecutive monthly decline. (Read: Nevada November Revenues Almost Flat, Las Vegas Down)

3.    The proposed acquisition of Caesars Acquisition Company and Caesars Entertainment Corp. is being investigated by Robbins Arroyo LLP, a law firm that represents individual and institutional investors in shareholder derivative and securities class action lawsuits. The investigation focuses on whether the board of directors at Caesars Acquisition is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.

Robbins Arroyo LLP will also examine the decision of Caesars Acquisition's board to sell the company now rather than allow shareholders to continue to participate in  its continued success and future growth prospects.

We note that on Dec 22, 2014, the two companies had announced the signing of a definitive merger agreement pursuant to which Caesars Entertainment will acquire Caesars Acquisition.  Under the terms of the agreement, Caesars Acquisition shareholders will receive $8.96 for each share of Caesars Acquisition common stock based on the Dec 19, 2014 closing price and representing a discount of 13.9%.

This discount is significantly below the median one month premium of nearly 45.8% for comparable transactions within the past five years. This reflects that the acquisition might not be in the best interest of shareholders.

4.    Recently, Sands China Ltd. – the majority owned subsidiary of Las Vegas Sands –received permission from the Macau government to complete the construction of its $2.7 billion Paris-themed integrated resort. Las Vegas Sands expects the Parisian Macao — its fourth property on the Cotai Strip — to open by late 2015. The property will feature roughly 3,000 rooms and suites, a gaming space, a retail mall, a replica Eiffel Tower, a MICE space in addition to diverse food, beverage and entertainment options. (Read: Sands China Gets Nod for Parisian Macao Casino Completion)

Performance

As expected, share prices of most of the companies declined over the last five trading sessions with the highest decline of 3.6% recorded by Melco Crown Entertainment Ltd. MPEL, followed by Las Vegas Sands that declined 3.4%. The decline reflects weak performance in the Las Vegas Strip and Macau. However, share price of Caesars Acquisition and Boyd Gaming Corp. BYD gained 2.2% and 0.8%, respectively.

Over the last six months, share price of most of the gambling stocks lost value with Melco Crown Entertainment witnessing the maximum decline of 33.3% followed by a decline of 29.2% recoded by Wynn Resorts Ltd.'s WYNN. However, share price of Boyd Gaming gained 1.2% over the same time frame.
 

What's Next in the Gambling World?

Since no major development is expected next week, the performance of gambling stocks is not expected to change significantly.

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