Gambling stocks have suffered from the recent market turmoil in spite of good profit numbers. The land based industry has shown significant recovery since 2009 but Internet gambling stocks have not done as well bringing out value investors.
Gambling companies were hit by the stock market selloff including Sands China which lost 5.3% of its value. The fall made no sense at all because Sands China produced a stellar 24% increase in operating profit for Q1 2011 compared to the same period last year. The Top Ten Companies by Market Capital are: 1. Las Vegas Sands; 2. Sands China; 3. Genting Singapore; 4. Wynn Macau; 5. SJM Holdings; 6. MGM China Holdings; 7. Wynn Resorts; 8. Melco Crown Entertainment; 9. Galaxy Entertainment; and 10. Genting Malaysia.
Of the 50 components in Global Betting and Gaming Consultants (GBGC) index of 50 leading gambling companies by market capitalisation Las Vegas Sands and Sands China continue to dominate the index along with the leading Asian companies, pointing to the fact that the growing economies and thus the people of that region are doing so much better economically than their western counterparts.
However a change of luck in Las Vegas saw an increase in revenues by 3% in fiscal 2011 after three years of decline. Direct flights from London and Asia have helped the companies in Vegas market outside the US.
The GBGC index of fifty leading stocks from a low of 53 on 9th March in 2009 had climbed to 130 by 5th August 2011 a 145% improvement. Internet stocks did less well falling 15.6% over the same period but down 43% from their peak in March 2010. Investors have however deserted the once stock market favourites Internet gambling.
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“The Internet gambling industry has had the worst possible run of bad luck this last two years. First of all UIGEA and the withdrawal from the lucrative US market followed by law changes in Europe now mean that companies have to licence in every jurisdiction and that has increased expenses along with higher taxation.
However shares have been significantly sold down to levels that are now attracting bargain hunters who see Betfair (down 42% since IPO), Bwin (down 45% since IPO) and Sportingbet (down 18% since January) representing a recovery prospect. BwinParty jumped 8% on the prospect of a takeover from either Willaim Hill or Wynn Resorts ranked 7th in the GBGC index. Sportingbet up 20% since June are in talks with Ladbrokes.
The fundamentals of broadband growth and SMART phones are still in place all that needs to change is the regulatory landscape and overtime politicians will realise that Internet gambling is not as harmful as they think it to be. Going forward in this new regulatory environment gambling companies that can serve their customers online as well as in the traditional land based betting shop or casino seem to be best placed” said Warwick Bartlett, Chief Exec, Global Betting and Gaming Consultants. (E-08.19.11)
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