Union Gaming Analytics Operator Index

Welcome to the November 2014 edition of the Union Gaming Analytics (UGA) Index of Gaming Operators.

The UGA Index for the period ending Nov. 30, 2014, was down 5.79 percent sequentially to 98.98 from 105.06 at Oct. 31, 2014. As an illustrative example, if an investor bought $100,000 of the Index on Dec. 31, 2013, the investment would hypothetically be worth $98,978 on Nov. 30, 2014. 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 to the broader markets, on a sequential basis, the Dow Jones Industrial Average was up 2.66 percent and the S&P 500 Index was up 2.47 percent.

The UGA Index comprises 28 domestic and global casino operators.

Top index performers included:
• Caesars Entertainment Corporation was up 39.1 percent and contributed 1.40 points to the index
during November 2014.
• Summit Ascent was up 35 percent and contributed 1.25 points to the index.
• Boyd Gaming Corporation was up 10.6 percent and contributed 0.38 points to the index.

Underperformers included:
• Paradise Co., Ltd. was down 15.1 percent and contributed -0.54 points to the index.
• Wynn Macau Ltd. was down 9.6 percent and contributed -0.34 points to the index.
• Kangwon Land Corp. was down 6.6 percent and contributed -0.24 points to the index.

Earnings Recap

Melco Crown 3Q14 Earnings
Melco Crown (MPEL) announced third quarter 2014 net revenues of U.S. $1,124 million, down 10 percent year-over-year, and above consensus of U.S. $1,037 million. Adjusted property-level EBITDA of U.S. $306 million, down 11 percent year-over-year, and compared favorably to consensus of U.S $281 million. On a luck-adjusted basis, property-level EBITDA was closer to U.S. $325 million (adjusted for VIP win, which came in slightly below the low-end of the expected range at 2.69 percent).

SJM Holdings 3Q14 Earnings
SJM Holdings reported 3Q14 revenues of HKD18.1 billion, down 14 percent year-over-year, which compared to the entire market that was down 7 percent. EBITDA of HKD1,751 million, down 14 percent year-over-year and below expectations of HKD1,968 on lower than anticipated margins despite a great mix of mass market revenue (43 percent in 3Q14 versus 36 percent in 3Q13). VIP win rate was 2.88 percent, or within the normalized range and therefore the reported EBITDA number was “clean” from a luck perspective. Net profit declined 16 percent to HKD1,528 million.

Galaxy Entertainment 3Q14 Earnings
Galaxy Entertainment reported 3Q14 revenues of HKD17.3 billion, up 6 percent year-over-year and down 5 percent sequentially. EBITDA of HKD3.3 billion was up 1 percent year-over-year and down 5 percent sequentially. Management noted that EBITDA in 3Q14 was negatively impacted by about HKD50 million due to bad luck in VIP.

Genting Singapore 3Q14 Earnings
Genting Singapore reported net revenues of SGD645 million, down 17 percent year-over year and below consensus expectations of SGD788 million. The exceptionally low VIP win rate (approximately 2 percent) explains the difference between the expectations and reported results. EBITDA of SGD254 million, down 27 percent year-over-year, was below expectations of SGD350. On a luck-adjusted basis, EBITDA was SGD397 million, or 13 percent above expectations.

Macau November Revenues
In November, Macau gross gaming revenue (GGR) declined 19.6 percent, to MOP24.3 billion (U.S. $3.0 billion) against a tough comp at +21.3 percent. The calendar comp was slightly favorable with one additional Sunday (although one less Friday) and there were no obvious weather issues in either period. On a year-to-date basis, GGR is up 0.3 percent. The absolute dollar level of GGR in November was below the range reported from June to September of this year (MOP25.6 billion to MOP28.9 billion), and was the lowest dollar level since MOP23.9 billion recorded in September 2012.

Las Vegas October Revenues
For October 2014, Las Vegas Strip gaming win was down 5.6 percent to $520.3 million. Strip baccarat win was down 35.5 percent to $97.3 million on 10.1 percent hold. Table game win (ex-baccarat) was up 3.7 percent to $162.4 million. Looking at the results with a bit more granularity, blackjack was down 12.1 percent to $57.8 million, craps was down 23.4 percent to $19.8 million and roulette was up 140.7 percent to $29.2 million. On the slot side, win was up 6.9 percent to $260.6 million. In October, statewide gaming win was down 4.3 percent to $913.6 million. Downtown Las Vegas gaming revenues were up 1.2 percent to $47.7 million.

Regional Trends
Regional markets continued to experience weakness in revenues seen in regional jurisdictions over the past couple of months. In October, Louisiana reported a 3.9 percent increase in gaming revenues, Iowa up 2.5 percent, Missouri up 1.7 percent, Mississippi up 0.9 percent, while Indiana reported a 4.1 percent decrease in gaming revenues and Illinois down 2.3 percent.

Online Real-Money Gaming
Revenues from online gaming/poker continue to show a slower ramp up than many had expected. It could be some time until these revenues reach significant levels and begin to contribute to state coffers at levels the states were expecting. The New Jersey Department of Gaming Enforcement released October 2014 Internet gaming revenues of $9.5 million, down 7.8 percent from September’s $10.3 million. For October, Nevada reported online poker revenues of $0.7 million and Delaware reported online poker rake and fee revenue of just $0.1 million. Beginning in the February report, the Nevada state revenue released a separate breakout for interactive poker revenue as a third market entrant (Real Gaming) went live during February. Payment processing issues, large banks not allowing transactions to be made with their credit/debit cards, as well as geolocation verification are continuing to weigh on results from all jurisdictions.

Other Events

Las Vegas Data and News
The Las Vegas Convention and Visitors Authority released October visitation statistics. Visitation was up 3.2 percent to 3.58 million visitors. Convention attendance decreased 9.1 percent for the month on a 19.3 percent increase in conventions and meetings held during the month. Citywide occupancy was up 130 basis points, Las Vegas Strip RevPAR was up 6.6 percent and Las Vegas Strip ADR increased 5 percent to $131.19.

Pennsylvania Gaming Expansion News
The Live! Hotel & Casino project proposed by the Cordish Companies was awarded the final category 2 gaming license in Philadelphia. The casino will feature 2,000 slot machines, 125 table games and an upscale 240-room boutique hotel.

Korea Gaming Expansion News
Paradise Co. broke ground on its US $1.7 billion Paradise City Casino resort at Yeongjong Island in the Incheon Free Economic Zone. The company partnered with Sega Sammy for this project, which will have 160 gaming tables, 340 slots and 750 hotel rooms. The resort will be a 15-minute walk from Incheon International Airport and will have a junket operator network to attract Chinese VIPs.

What to Look For in Next Month’s Index
Next month’s discussion will include commentary on regional gaming and updates on gaming expansion opportunities in the United States.

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