Scalper1 News
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 Scalper1 News
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