Union Gaming Analytics Operator Index

Welcome to the January 2015 edition of the Union Gaming Analytics (UGA) Index of Gaming Operators.

The UGA Index for the period ending Jan. 31, 2015, was up 10.19 percent sequentially to 100.36 from 91.08 at Dec. 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 $100,365 on Jan. 31, 2015. 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 down 3.75 percent and the S&P 500 Index was down 2.57 percent.

The UGA Index comprises 28 domestic and global casino operators.

Top index performers included:
• Grand Korea Leisure Co., Ltd. was up 24.3 percent and contributed 0.87 points to the index during January 2015.
• Isle of Capri Casinos, Inc. was up 22.3 percent and contributed 0.80 points to the index.
• Summit Ascent was up 14.6 percent and contributed 0.52 points to the index.

Underperformers included:
• Caesars Entertainment was down 30.6 percent and contributed -1.09 points to the index.
• MGM Resorts International was down 8.9 percent and contributed -0.32 points to the index.
• SJM Holdings Limited was down 7.4 percent and contributed -0.27 points to the index.

Earnings Recap
Las Vegas Sands Fourth Quarter Earnings
Las Vegas Sands reported 2014 fourth quarter net revenues of $3.47 billion, down 6.4 percent year-over-year and adjusted property EBITDA of $1.3 billion, up 12.4 percent year-over-year. The company’s Macau assets generated net revenues of $2.1 billion, a decrease of 16.3 percent, and property-level EBITDA decreased 14.9 percent to $713 million. In Las Vegas, net revenue of $362.6 million was down 6 percent year-over-year and property-level EBITDA was $78 million, down 11.6 percent. In Singapore, Marina Bay Sands net revenue was $838.6 million, up 27.1 percent year-over-year and property-level EBITDA was $518.5 million, up 100.3 percent year-over-year, including a $90.1 million benefit from a property tax reassessment received in the quarter. Sands Bethlehem posted net revenue of $133.6 million, while property-level EBITDA of $36.2 million was up 19.5 percent.

Sands China Limited Fourth Quarter Earnings
Sands China Limited reported net revenue of $2.12 billion, down 16.3 percent year-over-year and adjusted property EBITDA of $713 million, down 14.9 percent year-over-year. After adjusting for good luck in the VIP segment during the fourth quarter of 2014, adjusted property EBITDA was $686 million. The company continues to allocate more resources toward mass market and away from VIP (14 percent fewer VIP tables year-over-year). VIP gross gaming revenue (GGR) was down 37 percent year-over-year versus the market at -29 percent year-over-year. Mass table GGR was down 2 percent (premium mass was down 18 percent year-over-year) versus the market that was down 16 percent. Slot and electronic table gross gaming revenue was down 10 percent versus the market that was down 17 percent.

Macau January Revenues
In January, Macau GGR declined 17.4 percent year-over-year and increased 2 percent sequentially, to MOP23.7 billion (USD3 billion). The calendar was slightly favorable with one additional Saturday this year, although note that the Chinese New Year 2014 began on Friday, Jan. 31 versus Thursday, Feb. 19 this year. The total GGR over the last year’s months has been stable and in a fairly tight band of MOP23.3 billion to MOP24.3 billion.

Las Vegas December Revenues
For December 2014, Las Vegas Strip gaming win was down 16.4 percent to $555.2 million. Strip baccarat win was down 39.3 percent to $148.1 million on 11 percent hold. Table game win (ex-baccarat) was up 2 percent to $168.5 million. Looking at the results with a bit more granularity, blackjack was up 11.7 percent to $67.9 million, craps was up 6.9 percent to $21.7 million and roulette was up 25.1 percent to $30.6 million. On the slot side, win was down 6.5 percent to $238.7 million. In December, statewide gaming win was down 8.1 percent to $950.7 million. Downtown Las Vegas gaming revenues were up 3 percent to $43 million.

Regional Trends
Regional markets saw improvement in revenues in some regional jurisdictions compared with the past couple of months. In December, Iowa reported an 8.1 percent decrease in gaming revenues, Illinois was up 6.2 percent, Indiana up 3.1 percent and Louisiana was up 2.3 percent on a same-store basis while Mississippi was down 0.2 percent and Missouri was down 11 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 December 2014 Internet gaming revenues of $10.7 million, up 22.9 percent from November’s $8.7 million. For December, Nevada reported online poker revenues of $0.6 million and Delaware reported online poker rake and fee revenue of just $0.2 million. 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

Macau Data Points
During December, Macau visitation decreased by 1.8 percent year-over-year. Mainland China visitors rose by 1.1 percent year-over-year to 1,638,854, led by Guangdong province (654,325) and Fujian province (70,404). The number of mainland visitors traveling under the Individual Visit Scheme grew by 6 percent year-over-year. The average length of stay of visitors was 0.9 day, and overnight and same-day visitors had an average stay of 1.9 days and 0.2 day, respectively.

Las Vegas Data and News
The Las Vegas Convention and Visitors Authority released December visitation statistics. Visitation was up 5.5 percent to 3.12 million visitors. Convention attendance decreased 8.2 percent for the month on a 4.1 percent decrease in conventions and meetings held during the month. Citywide occupancy was up 310 basis points, Las Vegas Strip RevPAR was up 6.6 percent and Las Vegas Strip ADR increased 1.2 percent to $113.43.

For 2014, visitation was up 3.7 percent to 41.13 million visitors. Convention attendance increased 1.2 percent for the year on a 0.4 percent increase in conventions and meetings held during the year. Citywide occupancy was up 250 basis points, Las Vegas Strip RevPAR was up 7.8 percent and Las Vegas Strip average daily room rate increased 5.3 percent to $125.80.

New York Gaming Expansion News
The State Gaming Facility Location Board unanimously approved to open another round of bidding for a fourth license in the state’s Southern Tier. The board did not issue a time frame for the new bidding process and made it clear that plans previously submitted and rejected are very unlikely to make the cut. New proposals will need to be submitted by all bidders, a process that could open up competition to other operators that lost bids last month. Details of the new bidding process will be released shortly.

Maryland Properties Increase Table Games
The Horseshoe Baltimore and Maryland Live casinos received approval from the state lottery and gaming control commission to eliminate some slot machines and replace them with table games. The Horseshoe will reduce 300 slots machines bringing the total number to 2,200 and Maryland Live will be reduced to 3,912. The reductions will be completed by April 1. The table business is more profitable as the state allows operators to keep 80 percent of table game winnings versus 33 percent from slot machines. Maryland Live has 189 table games and is seeking to add at least 13 table games. Horseshoe Baltimore has 147 table games and is adding 30 tables.

Caesars Entertainment Operating Co. Opts for Bankruptcy
Caesars Entertainment Operating Co. (CEOC) voluntarily filed for bankruptcy with approximately $18 billion in debt on its balance sheet. This represents roughly 90 percent of Caesars Entertainment’s total debt load. Under the terms of the proposed financial restructuring, CEOC will convert its corporate structure by separating all of its U.S.-based gaming operating assets and real property assets into an operating entity and a new publicly traded REIT. CEOC does not foresee any interruption of operations across the companies’ 44 gaming and resort properties and expects to reduce debt by $10 billion to $8.6 billion.

What to Look For in Next Month’s Index
Next month’s discussion will include commentary on regional gaming, updates on gaming expansion opportunities in the U.S. and a wrap-up of fourth quarter 2014 earnings.

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