Market Vectors Gaming ETF worth a punt as Macau revenues soar

Jan 21st, 2013 | By | Category: Equities

Resorts and casinos are enjoying a number of tailwinds as the New Year gets going, as an improving US economy coupled with booming sales in Asia, most notably in China’s Macau region, bode well for the sector.

Market Vectors Gaming ETF worth a punt as Macau revenues soar

The NYSE Arca-listed Market Vectors Gaming ETF (BJK) could be worth a punt as Macau revenues soar to hit record highs.

Recent numbers out of Macau have been particularly impressive. 2012 saw gaming revenues hit a record $38.0 billion, up from $33.5 billion in 2011. December was exceptionally strong, as revenues hit a single month high of $3.5 billion.

In response to growing revenues in the region, companies have been taking steps to expand their operations there, with Cotai, a stretch of newly reclaimed land between Macau’s Taipa and Coloane islands, being a popular choice for new developments.

In recent news, MGM Resorts International announced the official transfer of real estate in Cotai on the same terms previously reported in October of last year. The land concession is for a 17.8 acre site in the Cotai area of Macau and will have a 25-year initial term, with the right to successively renew for additional periods, subject to applicable legislation.

Las Vegas Sands Corp has reported an 81% jump in revenue from Asia, Macau and Singapore, for its last round of earnings. Whilst the company is also exploring expansion in Macau, it is also contemplating to invest in new resorts in Spain and Canada in an attempt to not only boost sales and earnings, but also to diversify their geographical dependence.

But while Macau has been performing very well, Nevada saw its gaming revenues decline by just over 11% in November, though indicators are showing signs that numbers could bounce back in 2013. It is also worth noting that another economic stumble in China or the US would be detrimental to the industry. However, overall, the outlook is positive and investors appear to be taking a punt on the sector.

With many companies set to announce their latest quarterly earnings results soon, it will be interesting to see which players in this industry comes out on top. Las Vegas Sands reports its earnings on 1 February.

One way to play this theme is via the Market Vectors Gaming ETF (BJK). The fund tracks the Market Vectors Global Gaming Index and provides targeted exposure to the largest and most liquid companies in the global gaming sector.

The unique pure-play approach of the index demands that companies have to generate at least 50% of their revenues from gaming-related industries: This includes casino and hotels, sports betting (including internet gambling and racetracks) and lottery services, as well as gaming services, gaming technology and gaming equipment.

Despite the index’s relatively broad remit within the gaming sector, the index is overwhelmingly dominated by casino resort operators with nine out of the top ten constituents slotting into this classification. Currently, all of the top five constituents are casino and gaming resort plays, namely Las Vegas Sands, Sands China, Wynn Resorts, Galaxy Entertainment and Genting.

So far this year, the performance has been strong with the index adding 7.60%. MGM China, the Macau hotel and casino resort operator, has led the way, gaining 20.23%.

The fund is listed on the NYSE Arca and has a net expense ratio of 0.65%.


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