Union Gaming Analytics Operator Index

The UGA index for the period ending Nov. 30, 2013, was up 3.7 percent to 332.21 from 320.3 on Oct. 31, 2013. As an example, if an investor bought $100,000 of the index on Oct. 31, 2013, the investment would hypothetically be worth $103,715 on Nov. 30, 2013. On a year-to-date basis, UGA Index is up 76.4 percent. (Note, however, that the UGA Index is compiled for illustrative purposes only and is not being offered as an investment vehicle by Union Gaming Analytics or any affiliated entities.)

In comparing the UGA Index with the broader markets, the Dow Jones Industrial Average was up 3.5 percent sequentially and the S&P 500 Index was up 2.8 percent sequentially, while on a year-to-date basis the Dow Jones Industrial Average was up 25.6 percent and the S&P 500 Index was up 29.1 percent.

Top index performers include the following:

• Caesars Entertainment was up 17.5 percent and contributed 0.67 points to the index. Caesars stock price rally was due to the expected and subsequent approval of online gaming in New Jersey.
• Kangwon Land Corp. was up 13.9 percent and contributed 1.08 points to the index.
• Wynn Macau Ltd. was up 12.5 percent and contributed 3.16 points.

Underperformers include the following:

• Genting Hong Kong Limited was down 6.5 percent sequentially and contributed negative 0.3 points to the index.
• Genting Singapore PLC was down 3.6 percent sequentially and contributed negative 0.72 points to the index.
• Genting Berhad was down 2.5 percent sequentially and contributed negative 0.3 points to the index.

Notable Company Actions
On Nov. 1, 2013, Penn National Gaming Inc. completed the spinoff of Gaming and Leisure Properties Inc.
Wynn Resorts announced board approval for a $3 per share special dividend. The company also plans on increasing its quarterly dividend to $1.25 (about 3 percent dividend yield) from the current $1 per share.

Macau November Gaming Revenues
In November, gross gaming revenue (GGR) grew 21.3 percent, to MOP 30.2 billion (USD$3.8 billion) against a +7.9 percent comp. The calendar comparison was favorable with one additional Saturday this year. There were no notable weather issues this month or in the prior-year period. On a year-to-date basis, Macau GGR is now up 18.6 percent to MOP327.3 billion (USD$40.9 billion).

Online Gaming
On Nov. 8, 2013, Delaware online gaming officially went live. The state’s casino websites now provide a link to register for online gaming. The portals will allow users to play online casino games (slots, poker, blackjack and roulette) for real money. It is important to note that any adult physically located in the state can play online games, as state residency is not a requirement. The age requirement to play online games is 21. The launch in Delaware represents the first state to have a full complement of online games (slots, blackjack, roulette, craps and poker) operational.

On Nov. 26, 2013, New Jersey online gaming went live. At present, Caesars has six online sites, the Borgata Casino has three sites, the Tropicana Casino has two online sites, Trump Plaza has one site and Trump Taj Mahal has one site.

New York State Voters Approve Proposal 1
On Nov. 4, 2013, New York voters approved Proposal 1, allowing the Legislature to authorize and regulate up to seven casinos for the legislated purposes of promoting job growth, increasing aid to schools and permitting local governments to lower property taxes through revenues generated. Following the passage, Lt. Gov. Robert Duffy predicted specific casino projects/locations could be selected around mid-2014. The governor is expected to name a selection committee to evaluate RFPs. The ballot measure immediately allows four casinos in upstate New York, including two in the Catskills region, one casino in the Southern Region and one casino in the Capital Region. In addition, it will allow two 1,000 VLT centers in Long Island to be run by the OTBs in Nassau and Suffolk counties. Following an exclusion period, casinos may be approved in metropolitan New York City.

Pinnacle Entertainment 3Q13 Earnings
Pinnacle reported net revenues of $418.9 million, which was $5.8 million below the street estimate. Consolidated adjusted EBITDA was $102.6 million versus Wall Street’s $112.1 million estimate. EBITDA was negatively impacted by a one-time $3.3 million increase in legal reserves. In PNK’s South segment (L’Auberge Lake Charles, Boomtown New Orleans, L’Auberge Baton Rouge, Boomtown Bossier City and Ameristar Casino Hotel Vicksburg) Bossier City was impacted by new competition, and Lake Charles showed improvement. In PNK’s Midwest segment (River City, Belterra, Ameristar St. Charles, Ameristar Council Bluffs, Ameristar Kansas City, Ameristar East Chicago and River Downs) Belterra was impacted by new competition and heavy marketing in the Cincinnati market. Finally, in the West segment (Ameristar Casino Resort Spa Black Hawk, Cactus Pete’s and Horseshu Hotel & Casino) Blackhawk was affected by flooding.

Galaxy Entertainment 3Q13 Earnings
Revenues of HKD 16.3 billion were up 16 percent year-over-year and 4 percent sequentially. EBITDA of HKD 3.2 billion was up 24 percent year over year and 7 percent sequentially. EBITDA margin improved 140 bps year over year and 60 bps sequentially, driven by the company’s high-margin mass market business. Through the end of the decade, no other Macau casino concessionaire has a similarly sized developable land bank as Galaxy, which gives the company a future pipeline of no fewer than three new projects, including the under-construction Galaxy Macau Phase 2. Over the coming years, the company will be in a position to bring an additional two projects (Phases 3 and 4) online, as well as a refurbishment/rebuilding of the Grand Waldo casino on Cotai. The completion of this pipeline should put the company in the No. 2 position in Macau behind Sands China in terms of supply as measured by wholly-owned hotel rooms, table games and slot machines.

SJM Holdings 3Q13 Earnings
Reported GGR was up 11 percent year-over-year to HKD 21.1 billion and EBITDA was up 8 percent year over year to HKD 2,043 million. The 11 percent growth of SJM’s gaming revenue during the quarter compared to the entire market at 20 percent growth, although the under-performance wasn’t surprising given the capacity constraints of its properties, as well as the negative impact of lower VIP win-rate at Grand Lisboa (2.85 percent versus 3.12 percent in the prior year quarter).

Las Vegas Trends
Las Vegas Strip October gaming win was down 5.1 percent to $551.3 million against a modest comp +3.6 percent. Results were impacted by timing of collections as last October benefitted as the last two days of September rolled into October revenues. Strip baccarat win was up 16.5 percent to $150.9 million while drop increased 28.7 percent on 13.3 percent hold (roughly 50 bps lower than the LTM average), but 140 bps lower than the prior year. Table game win (excluding baccarat) increased 3 percent to $182.8 million; however, table game drop (excluding baccarat) was down 3.8 percent to $1.32 billion. Off the strip, statewide gaming win decreased 2.6 percent to $954.3 million, downtown Las Vegas gaming revenues also decreased 2.9 percent to $47.2 million, and the Las Vegas locals’ market was up 3.4 percent to $190.1 million.

Regional Trends
With an early read on November results, the Pennsylvania Gaming Control Board reported a 1.3 percent decrease in November slot revenues to $190 million. On a same-store basis (excluding Nemacolin), slot revenue was down 2.2 percent to $188.2 million. By comparison, the statewide results were weaker than October results of +0.3 percent.

What to Look for in Next Month’s Index
Next month’s December index will include early indications of online gaming in Atlantic City, Delaware and Nevada, as well as a wrap-up of 2013 events and a preview of 2014.

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