...........and the cycle repeats. A numbers disappoints, the media pounces, the stocks get crushed, the analysts dispell the fear, the stocks creep higher, a number beats expectations, the media trumpets all is well, the stocks jump higher, the analysts reiterate the story,............and so it goes.
While the music plays on the casinos rake in monster profits and build the next wave of money making boxes.
As you know, or should by now, the stocks move much more on perception than reality. A GGR consensus miss like this will give the media every excuse they need to launch in to another round of fear mongering about slowdowns here, there, and everywhere, oh my! It makes no difference to them that mass oriented companies like MPEL don't feel the pinch of lower GGR as badly. They'll forget all about the first 25 days of May and suggest the month end drop off is an ominous sign of things to come. This is the stuff they live for.
That's a kick in the nuts. The run rate was +15% one week ago so I wonder what happened? Maybe very low hold but it has to be more than that. So much for jumping over the 50 and 200 dma's. We're going to see $33's again.
Since I didn't get the customary e-mail from David Bain at Sterne Agee on GGR I think you are right, the data release is delayed due to the holiday which is why the SSE and the Hang Seng were closed yesterday. We should have it by tomorrow morning at the latest.
The big kahuna, the 200 dma, appears to be at $36. Another strong day could mean pushing above both of them. Love to see that on good volume.
Stronger than expected Chinese PMI, China's government continues to enact small stimulus plans, May GGR in mid teens, COD Manila 4 months away, smoking ban to have little to no effect, UnionPay a non-issue, massive EBITDA growth coming in the next 24 months, presently under valued, short thesis evaporating.
March 27, 2014 11:05 p.m. ET
BEIJING—Chinese Premier Li Keqiang said economic growth should be maintained at a "reasonable pace," in the latest hint that the government is ready to reach for stimulus measures if the current slowdown worsens.
With economic indicators showing a soft start to the year for China, economists have said that reaching the government's growth target of "about 7.5%" is looking doubtful. A series of investment banks have cut their forecasts for China's economy. Both J.P. Morgan and Bank of America Merrill Lynch now project 7.2% gross domestic product growth this year.
China has the capability and confidence to keep growth at a "reasonable pace," Mr. Li said in remarks to a meeting of provincial leaders in the northeastern province of Liaoning on Wednesday and that were reported by the official Xinhua News Agency on Friday.
Downward pressure on the economy should not be ignored, the report quoted Mr. Li saying. He said financing costs for companies should be lowered through monetary policy, reform of the banking system and development of a more diverse capital market.
Xinhua offered few further details, but the comments follow a series of government measures that could stimulate the economy in the short term.
Earlier this month, the State Council, the executive body that Mr. Li heads, pledged to bring forward already-approved infrastructure projects and accelerate budgeted spending and other measures to expand domestic demand. China's government typically speeds up approvals for big-ticket infrastructure projects when it believes the economy is flagging.
June 01, 2014 By Katie Barlowe
It all seemed like such perfect synergy: with Tokyo hosting the 2020 Summer Olympics, millions of tourists and sports fans from around the world would be visiting Japan, all looking for ways to spend their travel money. It would be the ideal time for the nation’s first casinos to open, in what might be the best untapped gambling market in the world.
There was only one problem: nobody ever ensured that everyone was on board with that plan. According to Japanese lawmakers who support the legalization of casinos in the country, their bill may be difficult to pass during the current legislative session, meaning that there may not be enough time to have casinos up and running by 2020, even if such a bill passes later on down the line.
The Japanese Diet (or parliament) is currently in session, and is scheduled to meet until June 22. In order for a bill to have a chance to pass, it must be sent to the upper house of the legislature at least 20 days before the session ends. That means that unless the bill is at least passed along to that house by Monday, which is very unlikely, casinos won’t be approved this session.
The Health Bureau has confirmed that some casinos are unable to put smoking rooms on their gaming floors.
The newspaper quotes the bureau’s director, Lei Chin Ion, as saying these casinos lacked the “necessary conditions” for smoking rooms.
Smoking will be banned on casino gaming floors from October 6, but will be allowed in smoking rooms with no gaming tables or slot machines, and in VIP gaming rooms.
That was from Macau Business. In Bain's note on the ban he also mentioned that some of what could be considered lower tier casinos likely do not have the means to comply with it. Incremental as it may be, this suggests more biz being driven in to the compliant casinos implying a small, potential market share gain for MPEL.
Macau: May GGR checks show improvement; April visitation strong at +10% YoY
According to our channel checks, Macau table-only gross gaming revenue (“GGR”) is MO26.3b (USD$3.3b) through May 25. The May GGR run-rate is ~+15% year over year (“YoY”) or MOP34.0b (USD$4.3b), including slot play assumptions. Given current investor skepticism (and focus) on Macau’s short-term results, but overall acknowledgement of its longer-term secular attributes, we believe last week’s GGR checks will be helpful for Macau stocks. Our May YoY GGR outlook remains between +12% and +17%.
+12% week over week. Last week’s average daily table GGR was MOP1.03b, up 12% to the previous week’s (May 11 – May 18) average daily table GGR of MOP920m, and flat with May 4 – May 11 average daily table GGR of MOP1.03b.
While weekly results can easily be influenced by hold/win-rate, as well as many issues that we would consider to be more distractionary and thus not necessarily proving of a fundamental read-through to the market or individual stocks, we believe last week’s results bode well given current investor scrutiny on short-term results.
Outside of showing a week-over-week increase, average daily results also broke MOP1b, a daily result which seems to have emerged as an investor psychological hurdle.
Market Share. According to our checks, table-only market share through May 25 is: SJM at 23.3% (vs. table-only April share of ~25.3%), Galaxy at 21.6% (vs. ~19.1%), LVS at 23.2% (vs. ~21.8%), MPEL at 12.2% (vs. ~14.0%), WYNN at 10.9% (vs. ~10.6%), and MGM at 8.8% (vs. ~9.2%).
April visitation. April visitation was +10% YoY, partially driven by a 9% increase in Hong Kong (“HK”) arrivals, which marks the first YoY visitation increase to Macau from HK since September 2013. We believe HK arrivals were driven by the Easter holiday date change into April versus March last year (Easter is not an official Mainland China holiday, so no impact there, in our view). Mainland visitation was +14% YoY and represented 66% of the total. HK represented 20% of the total.
2014 visitation to date is up 9% YoY, versus +2% in the same period last year and +4% for all of CY13.
We believe visitation is emerging as an increasingly important indicator to the health/growth of Macau as the Island becomes more reliant on mass gaming revenue (and less reliant on VIP), as well as ahead of significant supply increases.
If you haven't already done so read the article I cut and pasted under the post subject line "from Macau Business Daily."
Not that the guy says stuff we haven't heard before, but he summarizes it in a cogent way. The most important takeaway for me is his observation on how the comps from 2013 were always going to be difficult to measure up to in terms of YoY growth given the capacity constraint Macau will be operating under until the new casinos open in 2015. In other words growing visitation to the point GGR would hit another 19% increase was always going to be a challenge without new rooms coming on line. Once that became apparent all the casino stocks came under pressure as the pace of growth slowed.
Many of us used the valuation agrument for why the stocks should not have sold off but as a talking head on CNBC said the other day valuation is not a market timing tool. Valuation didn't stop investor's from exiting as many of them were just there to ride the wave.
Now it's time to look forward and understand that we are heading in to another period of accelerated growth for MPEL and the whole group as the doors to the new places swing open at differing points next year. Now is the time, I would guess, that funds are going to begin to take positions in anticipation of 2015 and in the realization (it appears) the group has bottomed as depressed valuations with continued growth put a floor in the prices.
Just looked at a 5 day chart. Arbitrage certainly appears to be a possible culprit yesterday as the price fell back in line with 6883.HK's close. Following the same pattern today.
Is the mass market Macau’s life insurance?
The mass market is not Macau’s life insurance, it’s its core. It’s much more important than a life insurance. I think the VIP business will always be there, it’s a sort of foundation but it’s volatile with economic cycles in China, power transitions, policies from Beijing. The mass market is the story about the emerging Chinese consumer class. That is a very small penetration coming to Macau and that’s a huge, very long-term story.
If only 1 percent of Chinese are coming to Macau, how can the territory absorb millions of new clients if 3 or 4 percent start coming in the future?
That goes to the capacity expansion of Macau from 2015 to 2017 that will double hotel capacity. Not all Chinese are going to come to Macau but today there’s definitely a bottleneck. If you want to come to Macau, quite often you can’t. You can’t find a hotel room. It’s one thing to be a day-tripper gambler from Guangdong province, it’s another thing if they live in Beijing or other province in China and want to stay three or four days. In the next ten years, you’ll have the current hotel capacity expansion, Hengquin Island, and the transportation network will be much better with a connection to the airport that helps support international and business travel. There’re a lot of reasons to think of in terms of supply expansion perspective that a lot of demand will be able to be backed. In the long term, there’s a lot to be built, a lot of demand just sited across the border that doesn’t have the ability to come to Macau right now.
Can we expect a surge in casino stocks this year?
I think the market got overheated late last year, early 2014 and it started to slow after. We put out an outlook last year titled ‘Drought and Flood’. The drought being the drought of capacity this year, and the flood being the expansion of capacity in 2015 and 2016. Next year, all else being equal, growth will start to accelerate over the years. When investors will go from selling momentum to becoming more interested in acceleration and growth we shall see.
Isn’t it a contradiction when you see investors increasing price targets and casino bonds improving at the same time shares are falling?
Investors fall into different camps. We have growth investors, value investors, momentum investors, global and local investors. This is an intriguing period of time. The underlying fundamentals for Macau casinos and the integrated resort industry really haven’t changed. But you go through periods of market turmoil that disconnect from fundamentals. The sell-side community of investors like to take a longer term view quite often and that’s maybe what’s driving target prices. First quarter results were robust, even if slower than last year. But it’s supportive of the long term story and that’s what the analyst community is thinking about. That’s a different dynamic to short term volatility and market sentiment. It’s not only gaming stocks that are suffering; technology has rolled over, biotech, some of the areas that were oriented towards high growth and momentum. On a short term basis quite often that can be a tough combination with slowing growth, and that creates where we currently are, which may well change at some point later this year.
In an interview with Business Daily during G2E 2014, Tim Craighead, Director of Asian Research & Senior Gaming Analyst, Bloomberg Industries, said current negative market sentiment about stocks is “disconnected” from the solid fundamentals of the Macau gaming industry.
Most major casino operators said in G2E 2014 that UnionPay and junket scandals are minor events and will not affect Macau’s success story. Do you agree?
In general, yes. We see the regulatory environment being consistently controlled and is very transparent in most ways, both in Macau as well in a broader China business perspective. We see a lot of positive dynamics of change going on. These news headlines are relatively minor issues in the grand scheme of growth opportunity that can be Macau and Hengquin Island and beyond.
But casino shares have already lost 25 percent since the beginning of the year, and this month stocks fell to a record 2-year low in a single session. Minor events, with big impacts?
We happen to be in a period of very negative market psychology that continues to magnify news headlines as opposed to last year when everything was very enthusiastic. If these same headlines had appeared at that time they would have been largely dismissed.
But analysts say investors are “anxious” and calling everyday
Markets tend to go through rotational cycles. Last year, growth accelerated into momentum. This year, from my perspective, has always been a bit of a pause. Growth was going to slow because we have very difficult year-on-yearly comparisons, have a lack of new resort capacity and a lack of new transport infrastructure, all of which accelerated growth last year. If you have investors moving in momentum mode and you start to see this momentum slow, that investor base quite often will exit. And it seems that’s what these casinos stocks are suffering this year.
According to industry sources, the agent involved was holding some money for clients and funding the rolling of new clients from the winnings of existing gamblers. When the new clients stopped winning, the agent was unable to pay the original clients.
The incident has fuelled a debate over the volatility surrounding the VIP gambling business in Macau. Junket operators bring high-rollers to the casinos from mainland China, issue them credit and collect players’ debts in exchange for commissions.
Dozens of investors are believed to have been defrauded when the sub-junket decamped last month.
Mr So, however, downplayed the impact the incident could have on the industry, saying that revenue would not be affected by the case, Macau media reports today.
The SJM chief executive said it might be hard to regulate they way junkets and their agents operate. He said the industry is now more vigilant to prevent similar cases from happening.
Last week, Morgan Stanley said the junket incident “could reduce the confidence of casino operators, junket investors and their agents in giving out new credits or putting more liquidity into the business”.
“Despite reports that the incident mainly involves side-betting, which is excluded from the reported numbers, it affects the VIP market as a whole, as both side-betting and the money being played on the tables came from the same source of working capital,” Morgan Stanley said in a note.
The Macau gaming industry was hit last week by a string of reports on junket liquidity and a potential crackdown on unregistered mobile China UnionPay card processors.
“We haven’t seen any negative effect. The mainland has been doing this for quite some time and it is a continue effort, but for the past few months, we have not seen a trend that the gaming revenue is affected by it,” Mr So said, quoted by Macau Daily Post.
IBD headline says LVS could be hurt but as Nomura clearly stated in their note while total revenue may be impacted by slower VIP growth net income will be helped by the higher margin mass business.
It's somewhat encouraging that the stocks have rallied in spite of the Nomura note. Perhaps an indication the street's comfort level is improving as it adjusts to modestly lower GGR expectations.