More casino losses were reported in China due to local corruption restraint, which is the reason why option traders forecast that the recovery of the industry in China would take longer than expected.
One of the analysts, who work at Rhino Trading Partners LLC – Timothy Chen – commented on a telephone interview for a reputable media: “Things are not going to rebound in 2015”. He also projected the current half of the year to be difficult at a time when the conditions are constantly changing.
Several companies, which operate in Macau – the gambling center of China – are put under pressure by the conditions in the region. Currently, Macau is the only place in China where casinos are not illegal. Not to mention the fact that the region is also considered as a passage for both businessmen and officials to bypass currency controls and transfer money to safer bank accounts than the mainland.
For example, the contracts for selling Wynn Resorts Ltd.’s shares are currently approaching the most expensive levels relative to the ones in more than a couple of years.
The bearish options of two other companies – MGM Resorts International and Las Vegas Sands Corp. – are no less than 70% more expensive in comparison to their one-year average, which is relative to calls. In addition, each stock lost more than a quarter over the past year at a time when the President of China Xi Jinping has been putting his efforts into fighting the illegal money transmitted through casinos located in Macau.
The gambling revenue in Macau fell by 2.6% in 2014. The industry sales were projected to decline by 8% in 2015 by Barclays Plc in a note issued on January 16th. The sales of Wynn Resorts in Macau declined by 5.6% over the third three months of the fiscal year. Las Vegas Sands’ revenue, on the other hand, fell both in the enclave and in Singapore.
Currently more than 65% of the above-mentioned companies’ revenue is generated in Macau.
MGM, which is known as the biggest casino owner on the Las Vegas Strip, also revealed a surprising loss in the third financial quarter because of the sharp revenue decline in the U.S. According to an average estimate compiled by a reputable financial media, the company’s earnings are likely to collapse by 42% over the fourth quarter.
Analysts also projected that the companies with gambling operations located in China are to face a lot of skepticism and scrutiny. However, they also shared the opinion there has been put an end to the largest earnings reductions for the Macau gaming sector.
