Macau is Gaming ETF’s Lucky Charm

ETF Trends

The gaming exchange traded fund is on a roll, with Citi Research maintaining a “maximum bullish” stance on the sector as Macau gaming revenue surges this year.

Since bottoming out on Feb. 5, the Market Vectors Gaming ETF (BJK) has gained 10.4%. BJK is up 2.2% year-to-date. [Gaming ETF Cools Ahead of Lunar New Year Revelry]

Citi projects Macau’s gross gaming revenue will surge 22% this year based on January and February numbers, reports Shuli Ren for Barron’s. Macau’s January and February combined revenue has been a good indicator for annual returns.

“Since 2005, Macau’s Jan/Feb combined GGR on average has represented 15.1% of its full-year GGR,” analysts Anil Daswani, George Choi, Raymond Choi and Solomon Chuen said. “This relationship holds true for seven out of the past nine years (the only exceptions were 2008, the year of the global financial crisis, and 2012, the year of a change in the Mainland Chinese government).”

Consequently, Citi analysts have raised thier price targets on a number of gaming companies, including Las Vegas Sands (LVS), Wynn Resorts (WYNN), MGM Resorts (MGM) and Melco Crown (MPEL).

Additionally, Macau is expected to see revenue growth as a strengthening global economy loosens up gamblers’ wallets. Meanwhile, competition remains relatively unchanged, with no major expected casino expansions.

“2014 will be a structurally good year for Macau, as it should enjoy continuous demand growth while seeing no major supply growth (except Macau Legend’s Harbor View, which could feature up to 139 gaming tables, 200 slots and 444 hotel rooms),” the analysts added.

The Market Vectors Gaming ETF has a 15.9% weight in China. The U.S. makes up the majority of the fund’s country exposure at 43.9%. Looking at the ETF’s holdings, LVS is 8.3%, WYNN is 8.7%, MGM is 4.2%, MEPL is 4.5%, Wynn Macau is 4.3% and MGM China is 3%.

Market Vectors Gaming ETF

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For more information on gambling industry, visit our leisure & entertainment category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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