Last month saw gambling stocks suffer after a strong start to the year with almost all of the gains from the previous four months lost in just a few weeks. Considering the troubles in Europe, a Chinese slowdown and the lack of progress in US gambling legislation, this is not particularly surprising.
However, it is not all bad news, Harry Curtis, an experienced gaming analyst from Normura Research believes that Macau related gaming companies will enjoy a 40% increase in value of the next year. In his prediction he said that companies such as Wynn Resorts Ltd, Las Vegas Sands Corp and MGM Resorts International, will benefit from China’s plans to increase loan grown and infuse more liquidity to the economy.
Curtis’ predictions come after it was announced that gambling in Macau rose by just 7.3% during May, far less than last year’s numbers. However, most gambling analysts think that Macau’s growth will be in the region of 15% which easily puts it in the lead of the world’s gambling locations.
Another company with bright prospects is Scientific Games. They are the primary vendor for lottery tickets in Illinois and New York and experience a 50% rise in value in the five weeks after December when the Department of Justice re-defined the Wire Act. Investors quickly realised that the benefits of selling lottery tickets online were more likely to be realised than the potential market for online poker.
Since then Scientific Games has significantly dropped in value, however, they have posted year-over-year revenue increases of 13% and 19% for Q4 2011 and Q1 2012. Furthermore, the worries surrounding casino stocks do not impinge in the same way on lottery revenues. There is also a high chance that legislation will pass for online lottery sales and Scientific Games will certainly benefit. It is certainly worth keeping an eye on this company over the coming months.