The week is coming to a close, and boy was it quite an eventful one. Below is a quick circumnavigation of planet Earth as it relates to gaming markets, the week’s events that affected them, and maybe what to watch out for next week.
The Super Bowl betting indicator is flashing green, though increasingly less brightly, with betting volumes in Las Vegas up 5.5% over last year. $154 million in total were staked in Nevada compared to $146 million last year, according to the Nevada Gaming Control Board. The NGCB, like the Iowa Democratic Party, released the full figures late this year due to technical difficulties with one sportsbook. Either the machines are rising up, or the novel coronavirus has gotten really novel indeed and started infecting computer systems everywhere.
The 5.5% growth figure could, on the one hand, be seen bearishly since it is down from last year’s more solid rate of 10%, which was down from 2018’s rate of 14%. Growth in Super Bowl betting volumes does appear to be slowing, which potentially means credit flows could be slowing. We will have to examine MGM visitor volumes when earnings are released next week to gather more evidence. Alternatively, it could just be that betting volumes are simply being spread out over the country with Nevada losing market share. I favor this latter interpretation at this point, though it is not entirely clear.
U.S. gaming markets remain on a buy signal, most likely through April or May.
The United Kingdom
The Brexit headlines are gathering once again for another soul-sucking round of brinkmanship that should continue for the next 11 months at minimum, or until our brains melt, whichever comes first. The latest is that German politicians visited the U.K. yesterday, February 6, and were surprised over Prime Minister Boris Johnson’s hard line stance on negotiations for the transition period. The risk of a no-deal Brexit is now “as high as it has ever been” whatever the heck that means.
The U.K. gaming market has not had a good January, with the exception of Rank Group, long a favorite long-term hold, up 8.13% this year so far. Another favorite, 888, is trailing the pack badly, down a hefty 15.6% year-to-date. I view Rank and 888 similarly, both financially strong companies with very good long term fundamentals. Rank has doubled since July, and 888 is potentially double-bottoming here. Investors can arbitrage here and move some Rank capital over to 888 to capture the 5.2% dividend there, but keep the overall positioning in these two companies more or less the same.
The merger of Flutter and The Stars Group into the “Stutter Group” is coming under scrutiny by “watchdogs” AKA busybodies. Price action for both could get volatile if there are any delays in the merger as a result.
The largest ICE London meeting on record this week though shows that there is still plenty of juice left for an overall rebound over the next few months in the U.K. gaming sector.
Betsson and NetEnt look like they have found a floor. They are both profitable, very low debt, have 9% plus dividends and are in good financial shape. These companies are buys at these levels, even with low growth prospects and regulatory harassment. Dividend reinvestment is the way to go here. Tuck them away for now.
Assuming Beijing isn’t flat out lying to the world about the lethality of the coronavirus, it looks like the situation is slowly being contained. Newly reported cases have dropped for two days now. Meanwhile, Macau, like Ross and Rachel, is on a break. Forecasts are getting gloomy in general, perhaps justifiably so, expectations losing luster, but I still expect a short term bump once the epidemic gets handled and the world breathes a sigh of relief. Besides, the coronavirus isn’t all bad for Macau stocks. It is keeping Chinese VIPs in Vegas for longer, spending their money there at some of the same casinos they would be patronizing in Macau.
Of course, if Beijing is flat out lying, which is possible, then there won’t be a bump. The truth is probably somewhere in the middle, as usual.
Rain is finally helping out with putting out the worst of the Australian bushfires. Tabcorp shares haven’t seemed to mind too much that the country has basically been ablaze for four months. If you want a safe place to park money while you go cryogenically freeze yourself for fun, Australia is still the way to go.
General business cycle update
The money is flowing, the Fed keeps printing, and price levels in equities generally should be sustained through April or May. We will check back in around June to see where we could be by late summer, which is an open question at this point. By then we will also have a much better idea of who Donald Trump’s challenger for the next American Emperor will be. Emperor Bernie? Sounds like a mockumentary title. One weekend at Bernie’s was enough. Can we handle four years of it? I quake.