More than two years after a government crackdown on corruption sent Macau gaming stocks tumbling, The Chinese government has unveiled yet another new regulation on the Macau gaming industry that has hit gaming stocks hard. The latest new law cut the daily ATM withdrawal limit in Macau from 10,000 patacas to 5,000 patacas, or roughly $626.
Unfortunately, transparency and predictability has never been one of the Chinese government’s strong points. Wynn Resorts, Limited (NASDAQ: WYNN) CEO Steve Wynn said the government’s behavior was “preposterous” when it kept operators in the dark about how many table games they would be allotted just weeks prior to opening billion-dollar new resorts. For the record, none of the major operators that have opened resorts in the past two years have received the table allotment they requested.
Although the U.S. gaming market likely doesn’t have the kind of long-term growth potential that Macau does, U.S. casinos are doing just fine these days. In the current fiscal year, Las Vegas Strip revenue is trending about 6% ahead of last year, and other regions of the country are doing even better. For better or worse, U.S. stock investors likely won’t have to worry about new regulations in the next four years under President-elect Trump.
For gamblers, bets on Macau plays like Las Vegas Sands Corp. (NYSE: LVS) and Wynn Resorts, Limited may offer the biggest potential payoffs. However, domestic gaming stocks are the safer bets during the next several years.
The Sports Gambling Favorite
Boyd Gaming Corporation (NYSE: BYD) shares are only up 4.7% so far in 2016 despite the fact the company owns 10 casinos in the Las Vegas area, including three in Downtown Las Vegas. Strip revenue has been solid, but Downtown Vegas revenue has been soaring in recent months. In fact, this fiscal year, downtown gaming revenue is up 13.7 percent, the strongest growth in any region of Nevada.
While The Chinese government has been a thorn in the side of casino stocks, the U.S. government could soon step in and provide BYD with a major shot in the arm. Congress is currently reviewing sports betting laws. If the national ban on sports betting is lifted, BYD and its newly-updated B-Connected Sports mobile app could be in prime position to capitalize. B-Connected was the first mobile gambling app to feature horse racing, and it will soon add a live race streaming option as well.
From a value perspective, BYD currently trades at a forward PE ratio of just 15.7. Reasonable value, entirely domestic exposure, and a major potential catalyst make BYD a great U.S. option for fed-up Macau investors.
The Nevada Pure-Play
If you’re looking for even more of a Las Vegas pure-play, Red Rock Resorts Inc (NASDAQ: RRR) is…
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