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Monday, November 3, 2008
Shifting Sands, by Miriam Marcus - Forbes - 29th October 2008
Shares in casino and hotel operator Las Vegas Sands nearly doubled Wednesday as investors who had been betting against the gaming industry apparently decided to close out their positions and book their gains.
The casino business has been struggling as consumers continue to curb spending due to the U.S. housing downturn, diminishing credit, rising food costs and recession worries. Some companies have also had to delay or cancel development projects due to funding difficulties arising from the global credit crisis.
As the economy deteriorated, investors had become increasingly worried about the financial health of Las Vegas Sands. On Friday, the company said its billionaire chairman Sheldon Adelson and his family plan to take part in a capital-raising program with an unidentified investment firm.
The company is spending money to expand in Macau at a time that its established properties in Las Vegas are under pressure.
Shares of Las Vegas Sands rose 80.0%, or $3.96, to $8.91 . The stock had fallen as low as $4.32 earlier this week, but remains 93.6% below its year-ago price of $138.93. Rival Wynn Resorts also had a good day on Wednesday, gaining 24.9%, or $8.17, to $41.05.
Sand's ascent early in the day sparked call option buying, according to Interactive Brokers analyst Andrew Wilkinson, where investors obtained the right--but not the obligation--to buy the stock at a specified price within a specified time period.
The run-up seems to have led to a short squeeze on the stock in trading as the day progressed. As of Oct. 15, there was short interest of 24.9 million shares in the company. That's a significant 22.6% of the shares not owned by Adelson.
It was erroneously reported by several services that Las Vegas Sands was to report its third-quarter earnings after the closing bell Wednesday, but a Sands investor relations representative told Forbes.com that the company would announce the release date of its financial report in the next day or two.
Boosting Sands' performance was competitor MGM Mirage's reporting of funding commitments for its CityCenter project. MGM, which obtained a $1.8 billion senior bank credit facility earlier this month to help with its $9.2 billion CityCenter project in Las Vegas, said it has received additional commitment letters for more than $500.0 million and is working with joint venture partner Dubai World to get additional funds. The company is looking to secure a total of $3.0 billion in financing for the development.
MGM reported a 66.7% decline in third-quarter earnings early Wednesday, to $61.3 million, or 22 cents per share, compared with $183.9 million, or 65 cents per share in the year-earlier quarter. Revenues decreased 4.8% to $2.0 billion from $2.1 billion last year. Analysts polled by Thomson Financial had expected the casino operator to earn $89.2 million, or 31 cents per share, on sales of $1.8 billion.
"MGM missed with downside revenue and margin in Vegas operations ... but investors may have been expecting worse and headlines about a possible debt deal ease balance sheet concerns," noted Thomas Weisel analyst Jake Fuller.
Despite its poor earnings results, shares in MGM Mirage traded up 33.1%, or $4.42, to close at $13.75, on Wednesday, on its announced plans to issue secured debt.
Market Vectors Gaming, an exchange-traded fund that tracks the casino industry, was up 10.7%, or $1.61, to $16.70, on Wednesday. But the fund traded as high as $45 early this year, shortly after it was introduced.
(Credit: Forbes.com)
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The casino business has been struggling as consumers continue to curb spending due to the U.S. housing downturn, diminishing credit, rising food costs and recession worries. Some companies have also had to delay or cancel development projects due to funding difficulties arising from the global credit crisis.
As the economy deteriorated, investors had become increasingly worried about the financial health of Las Vegas Sands. On Friday, the company said its billionaire chairman Sheldon Adelson and his family plan to take part in a capital-raising program with an unidentified investment firm.
The company is spending money to expand in Macau at a time that its established properties in Las Vegas are under pressure.
Shares of Las Vegas Sands rose 80.0%, or $3.96, to $8.91 . The stock had fallen as low as $4.32 earlier this week, but remains 93.6% below its year-ago price of $138.93. Rival Wynn Resorts also had a good day on Wednesday, gaining 24.9%, or $8.17, to $41.05.
Sand's ascent early in the day sparked call option buying, according to Interactive Brokers analyst Andrew Wilkinson, where investors obtained the right--but not the obligation--to buy the stock at a specified price within a specified time period.
The run-up seems to have led to a short squeeze on the stock in trading as the day progressed. As of Oct. 15, there was short interest of 24.9 million shares in the company. That's a significant 22.6% of the shares not owned by Adelson.
It was erroneously reported by several services that Las Vegas Sands was to report its third-quarter earnings after the closing bell Wednesday, but a Sands investor relations representative told Forbes.com that the company would announce the release date of its financial report in the next day or two.
Boosting Sands' performance was competitor MGM Mirage's reporting of funding commitments for its CityCenter project. MGM, which obtained a $1.8 billion senior bank credit facility earlier this month to help with its $9.2 billion CityCenter project in Las Vegas, said it has received additional commitment letters for more than $500.0 million and is working with joint venture partner Dubai World to get additional funds. The company is looking to secure a total of $3.0 billion in financing for the development.
MGM reported a 66.7% decline in third-quarter earnings early Wednesday, to $61.3 million, or 22 cents per share, compared with $183.9 million, or 65 cents per share in the year-earlier quarter. Revenues decreased 4.8% to $2.0 billion from $2.1 billion last year. Analysts polled by Thomson Financial had expected the casino operator to earn $89.2 million, or 31 cents per share, on sales of $1.8 billion.
"MGM missed with downside revenue and margin in Vegas operations ... but investors may have been expecting worse and headlines about a possible debt deal ease balance sheet concerns," noted Thomas Weisel analyst Jake Fuller.
Despite its poor earnings results, shares in MGM Mirage traded up 33.1%, or $4.42, to close at $13.75, on Wednesday, on its announced plans to issue secured debt.
Market Vectors Gaming, an exchange-traded fund that tracks the casino industry, was up 10.7%, or $1.61, to $16.70, on Wednesday. But the fund traded as high as $45 early this year, shortly after it was introduced.
(Credit: Forbes.com)
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Wynn Wins With Macau, by Miriam Marcus - Forbes - 30th October 2008
Soft revenues at Wynn Resorts' Las Vegas casino are being offset by improved results at its Macau property.
Wynn Resorts announced a 14.3% increase in third-quarter earnings after the closing bell Thursday, and the casino operator's shares logged a second consecutive day of double-digit gains.
With Americans tightening their spending amid the economic slowdown, U.S. casinos aren't packing in the crowds of a few years ago. Earlier this month, Wynn warned of a profit shortfall at its Las Vegas casino. However, increased business at its casino in the Chinese gambling enclave of Macau allowed the Las Vegas-based company to post a quarterly earnings rise.
"China is pretty stable for us. Las Vegas ... is a little murky," said billionaire casino mogul Stephen A. Wynn, the company's chief executive officer, adding that the biggest area of softness is midweek business in Las Vegas.
Wynn's net revenue rose 17.7% to $769.2 million, from $653.4 million, in the recent quarter, led by an overall casino revenue jump of 23.9% while room revenue dropped 2.5%. Earnings jumped to $51.1 million, or 49 cents per share, compared with $44.7 million, or 41 cents per share, in the year-earlier quarter.
Wynn is preparing to open its newest casino resort, the 2,000-room Encore Las Vegas, on Dec. 22. It expects the smaller Encore Macau to be finished by the first quarter of 2010. (See: " Wynn Resort Plan Not Yet A Winner In Macau.")
Wynn shares gained 13.3%, or $5.45, to close at $46.50 on Thursday, following a jump in gaming stocks the day before, as investors who had been betting against the gaming industry apparently decided to close out their positions and book gains. (See: " Shifting Sands.") A short squeeze on Las Vegas Sands sent its shares soaring and rival MGM Mirage rose on its plans to issue secured debt, despite its poor earnings results.
Shares in Las Vegas Sands jumped 16.5%, or $1.47, to $10.38 on Thursday while MGM Mirage shares gained 11.8%, or $1.62, to $15.37.
Market Vectors Gaming, an exchange-traded fund that tracks the casino industry, rose 9.1%, or $1.52, to $18.22, on Thursday. The ETF traded as high as $45 early this year, shortly after it was introduced.
(Credit: Forbes)
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Wynn Resorts announced a 14.3% increase in third-quarter earnings after the closing bell Thursday, and the casino operator's shares logged a second consecutive day of double-digit gains.
With Americans tightening their spending amid the economic slowdown, U.S. casinos aren't packing in the crowds of a few years ago. Earlier this month, Wynn warned of a profit shortfall at its Las Vegas casino. However, increased business at its casino in the Chinese gambling enclave of Macau allowed the Las Vegas-based company to post a quarterly earnings rise.
"China is pretty stable for us. Las Vegas ... is a little murky," said billionaire casino mogul Stephen A. Wynn, the company's chief executive officer, adding that the biggest area of softness is midweek business in Las Vegas.
Wynn's net revenue rose 17.7% to $769.2 million, from $653.4 million, in the recent quarter, led by an overall casino revenue jump of 23.9% while room revenue dropped 2.5%. Earnings jumped to $51.1 million, or 49 cents per share, compared with $44.7 million, or 41 cents per share, in the year-earlier quarter.
Wynn is preparing to open its newest casino resort, the 2,000-room Encore Las Vegas, on Dec. 22. It expects the smaller Encore Macau to be finished by the first quarter of 2010. (See: " Wynn Resort Plan Not Yet A Winner In Macau.")
Wynn shares gained 13.3%, or $5.45, to close at $46.50 on Thursday, following a jump in gaming stocks the day before, as investors who had been betting against the gaming industry apparently decided to close out their positions and book gains. (See: " Shifting Sands.") A short squeeze on Las Vegas Sands sent its shares soaring and rival MGM Mirage rose on its plans to issue secured debt, despite its poor earnings results.
Shares in Las Vegas Sands jumped 16.5%, or $1.47, to $10.38 on Thursday while MGM Mirage shares gained 11.8%, or $1.62, to $15.37.
Market Vectors Gaming, an exchange-traded fund that tracks the casino industry, rose 9.1%, or $1.52, to $18.22, on Thursday. The ETF traded as high as $45 early this year, shortly after it was introduced.
(Credit: Forbes)
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Poker News Media Achieves Sign Off From Poker News Daily - 2nd November 2008
The Poker News Media blog, edited by Media Man Australia and Casino News Media, has achieved official approval from Poker News Daily to include some of their news, with credit of course, in the updated. This marks another significant step in the growth, reach and news media coverage from Media Man Australia and Casino News Media. We're most impressed with Poker News Daily and MMA and CNM is confident that this marks a mutually beneficial arrangement. Poker News Daily has also achieved cross over media coverage into the mainstream media spectrum in the process. It may even warrant a mention at the upcoming CAP Down Under, put on by our friends at Casino Affiliate Programs.
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Sunday, November 2, 2008
Saturday, November 1, 2008
Chips are down for gambling industry, by Sara Rich - The Australian - 1st November 2008
The spring horse-racing carnival, headlined by the Victoria Derby today and the Melbourne Cup on Tuesday, is a time of excitement and frivolity.
But for the people at the top of Australia's gambling industry, a dark cloud hangs over the celebrations.
The global financial crisis, which has seen everything from stock markets to household balance sheets plummet, is being felt by the biggest gaming providers in Australia and around the world as consumers cut back on discretionary spending.
Gambling's mecca, Las Vegas, has endured monthly declines in revenue for most of this year as struggling businesses tighten balance sheets by cancelling expensive conferences, while resorts struggle to fill their previously overbooked rooms.
Las Vegas casino developer MGM Mirage last week posted a 67 per cent drop in third-quarter net income, with revenue falling by 7 per cent to $1.95 billion.
The company cited a "stay-at-home mentality" among consumers as having a strong effect on earnings during September.
Meanwhile, new Chinese visa laws that limit travel to Macau, the world's newest gambling playground, have stunted revenue growth at the city's casinos.
The effect of this is being felt close to home as well, as James Packer's gaming group, Crown, operates a casino there and is in the process of building a second one.
The Australian company has lost $6 billion in value since late last year as its share price continues to fall.
The value of its stock has steadily decreased from $14.27 since the company was split from Mr Packer's media investment group Consolidated Media last December, closing yesterday at $6.70.
But while Crown contends that its Australian operations continue to deliver solid results, with revenue from table games and gaming machines growing rather than reversing, other local players have not been as fortunate.
The world's second-largest maker of poker machines, Sydney-based Aristocrat Leisure, was forced to explain to shareholders and analysts last week why it was downgrading its profit forecast by as much as $80million -- an announcement that led to 28 per cent being slashed from the company's share price as risk-adverse investors dumped the troubled stock.
The company's chairman, David Simpson, blamed challenging economic conditions that had dampened enthusiasm for its latest product offering in Japan.
According to Mr Simpson, gaming operators just aren't spending like they used to.
Major betting outlet Tabcorp, the name behind Keno and TAB Sportsbet and the manager of casinos Star City and Jupiters, is also struggling under the worst economic downturn in years.
At the company's recent annual general meeting, chairman John Story revealed casino revenues were flat.
But it is not just the deterioration in global financial markets -- which made it "inappropriate" for Tabcorp to provide a forecast on future dividends -- that is affecting the company's bottom line; government legislation is also proving to be a minefield.
Tabcorp and rival gaming provider Tatts Group were hit with a bombshell in April when the Victorian Government announced changes to the state's gambling industry structure, which would effectively terminate their licences in 2012.
Meanwhile, the internet is flooding the market with new competitors who are not required to hold wagering licences in NSW and Victoria. On top of that, relatively relaxed tax laws for bookies in the Northern Territory are threatening the revenue prospects of other states.
With the added pressures of full indoor smoking bans in Victoria and NSW and the disruption to horse-racing as a result of equine influenza, it seems the global financial crisis could not have come at a worse time.
Greg Fraser, senior industrial analyst at Shaw Stockbroking, said consumers were spending less on just about everything -- and gambling was no exception.
"The gaming industry is reasonably closely correlated to household disposable income and when that declines so does gambling expenditure," he said.
"Consumer confidence is declining as people feel less secure about their jobs. That points to lower turnover in the gambling industry as well."
The Reserve Bank of Australia has predicted household income growth to wane over the next two years, citing the effects of global financial crisis.
Over the past five years, the amount of money Australian households had left over to spend, after paying taxes and interest, grew by 6.1 per cent per year -- the fastest rate in more than 30 years.
"I think it is now widely accepted that growth in real incomes over the next year or two will be more subdued than over the past five years," Reserve Bank deputy governor Ric Battellino said last week while addressing a bankruptcy conference. "How subdued will depend importantly on the effects of the financial turmoil."
Ironically, casinos are a major contributor to economic growth in Australia -- in 2005-06 they contributed a combined $7.5 billion in GDP and provided $2.5 billion in salaries and wages.
State governments are also heavily reliant on the income derived from the industry, with casinos contributing 26 per cent of all revenue to government taxes during the same period.
Historical analysis does provide a glimmer of hope though, with the industry having not posted any negative revenue growth in the last 30 years.
"If history is anything to go by the sector is fairly defensive," UBS gaming, paper and packaging analyst Sam Theodore said.
However, Mr Theodore contends that the industry is now a lot more mature than it was in the previous three economic cycles, when demand for slot machines and new products was surging.
"Is history going to be repeated? That's the question and no one knows the answer," he said.
"It is still in the consumer discretionary space so if there is pressure on the consumer, gaming feels it like other industries -- but I think there is a relative defensiveness there."
(Credit: The Australian)
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But for the people at the top of Australia's gambling industry, a dark cloud hangs over the celebrations.
The global financial crisis, which has seen everything from stock markets to household balance sheets plummet, is being felt by the biggest gaming providers in Australia and around the world as consumers cut back on discretionary spending.
Gambling's mecca, Las Vegas, has endured monthly declines in revenue for most of this year as struggling businesses tighten balance sheets by cancelling expensive conferences, while resorts struggle to fill their previously overbooked rooms.
Las Vegas casino developer MGM Mirage last week posted a 67 per cent drop in third-quarter net income, with revenue falling by 7 per cent to $1.95 billion.
The company cited a "stay-at-home mentality" among consumers as having a strong effect on earnings during September.
Meanwhile, new Chinese visa laws that limit travel to Macau, the world's newest gambling playground, have stunted revenue growth at the city's casinos.
The effect of this is being felt close to home as well, as James Packer's gaming group, Crown, operates a casino there and is in the process of building a second one.
The Australian company has lost $6 billion in value since late last year as its share price continues to fall.
The value of its stock has steadily decreased from $14.27 since the company was split from Mr Packer's media investment group Consolidated Media last December, closing yesterday at $6.70.
But while Crown contends that its Australian operations continue to deliver solid results, with revenue from table games and gaming machines growing rather than reversing, other local players have not been as fortunate.
The world's second-largest maker of poker machines, Sydney-based Aristocrat Leisure, was forced to explain to shareholders and analysts last week why it was downgrading its profit forecast by as much as $80million -- an announcement that led to 28 per cent being slashed from the company's share price as risk-adverse investors dumped the troubled stock.
The company's chairman, David Simpson, blamed challenging economic conditions that had dampened enthusiasm for its latest product offering in Japan.
According to Mr Simpson, gaming operators just aren't spending like they used to.
Major betting outlet Tabcorp, the name behind Keno and TAB Sportsbet and the manager of casinos Star City and Jupiters, is also struggling under the worst economic downturn in years.
At the company's recent annual general meeting, chairman John Story revealed casino revenues were flat.
But it is not just the deterioration in global financial markets -- which made it "inappropriate" for Tabcorp to provide a forecast on future dividends -- that is affecting the company's bottom line; government legislation is also proving to be a minefield.
Tabcorp and rival gaming provider Tatts Group were hit with a bombshell in April when the Victorian Government announced changes to the state's gambling industry structure, which would effectively terminate their licences in 2012.
Meanwhile, the internet is flooding the market with new competitors who are not required to hold wagering licences in NSW and Victoria. On top of that, relatively relaxed tax laws for bookies in the Northern Territory are threatening the revenue prospects of other states.
With the added pressures of full indoor smoking bans in Victoria and NSW and the disruption to horse-racing as a result of equine influenza, it seems the global financial crisis could not have come at a worse time.
Greg Fraser, senior industrial analyst at Shaw Stockbroking, said consumers were spending less on just about everything -- and gambling was no exception.
"The gaming industry is reasonably closely correlated to household disposable income and when that declines so does gambling expenditure," he said.
"Consumer confidence is declining as people feel less secure about their jobs. That points to lower turnover in the gambling industry as well."
The Reserve Bank of Australia has predicted household income growth to wane over the next two years, citing the effects of global financial crisis.
Over the past five years, the amount of money Australian households had left over to spend, after paying taxes and interest, grew by 6.1 per cent per year -- the fastest rate in more than 30 years.
"I think it is now widely accepted that growth in real incomes over the next year or two will be more subdued than over the past five years," Reserve Bank deputy governor Ric Battellino said last week while addressing a bankruptcy conference. "How subdued will depend importantly on the effects of the financial turmoil."
Ironically, casinos are a major contributor to economic growth in Australia -- in 2005-06 they contributed a combined $7.5 billion in GDP and provided $2.5 billion in salaries and wages.
State governments are also heavily reliant on the income derived from the industry, with casinos contributing 26 per cent of all revenue to government taxes during the same period.
Historical analysis does provide a glimmer of hope though, with the industry having not posted any negative revenue growth in the last 30 years.
"If history is anything to go by the sector is fairly defensive," UBS gaming, paper and packaging analyst Sam Theodore said.
However, Mr Theodore contends that the industry is now a lot more mature than it was in the previous three economic cycles, when demand for slot machines and new products was surging.
"Is history going to be repeated? That's the question and no one knows the answer," he said.
"It is still in the consumer discretionary space so if there is pressure on the consumer, gaming feels it like other industries -- but I think there is a relative defensiveness there."
(Credit: The Australian)
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