US – AGEM Index falls by 2.4 per cent from last monthBy Phil - 10 July 2015
The AGEM Index fell to 192.28 in June 2015, which represents a decline of 4.7 points or 2.4 per cent compared to the prior month.
The latest performance represents the second consecutive month-to-month decline after the composite index fell 3.7 points down 1.8 per cent in May 2015. Despite falling in recent months, the AGEM Index witnessed its fourth consecutive year-over-year gain in June 2015, rising 6.94 points, up 3.7 per cent.
During the latest period, five of the 13 global gaming equipment manufacturers reported gains in stock price. However, most of these gains were relatively modest, with four up by less than three per cent.
The one standout was Daktronics, Inc. (DAKT) that pushed north 10 per cent. Of the eight manufacturers that reported declines in stock price, one was down by 17 per cent, while another fell 36 per cent.
The broader stock markets reported similar trends in June 2015. The Dow Jones Industrial Average ended the month at 17,619.51, which represents a decline of 2.2 percent compared to May. In addition, the S&P 500 fell 2.1 percent to 2,063.11, while NASDAQ fell 1.6 percent to 4,986.87.
Daktronics contributed 0.61 points, due to a 10 per cent increase in stock price to $11.86. Scientific Games Corporation reported a stock price of $15.54, up 2.1 per cent and contributed 0.33 points. Aristocrat Technologies reported a stock price of AU$7.65, down 1.9 per cent and contributed negative 2.30 points to the index. With a stock price of AU$2.57, down 17.1 per cent, Ainsworth Game Technology contributed negative 1.45 points. Crane contributed negative 1.20 points, due to a three per cent decline in stock price to $58.73.
In Macau, the rapid decline in gross gaming revenue that plagued the market in the second half of 2014 has continued through the first half of 2015. In June, Macau reported gaming revenue of $2.2bn, representing a drop of 36.2 per cent year-over-year as well as the 13th straight month of decline and the 10th straight month of double-digit drops. Year-to-date, total gaming revenue of $15.2bn is down 37 per cent from 2014.
The downward trend has been linked to several factors, mainly an ongoing corruption investigation on mainland China that has curtailed the lucrative VIP gaming segment. In 2011, VIP baccarat play accounted for 72.9 per cent of gross gaming revenue. Last year, that figure fell to 60.3 per cent. In the first quarter of 2015 (latest available data), the share fell to 57.9 per cent compared to 63.5 per cent in the prior year period.
A partial smoking ban is also a factor in falling gaming revenues, as it limits smoking in casinos to designated lounges and VIP gaming areas. Gaming revenue declines could be exacerbated should the Macau government implement a full indoor smoking ban in the near future, as it has indicated it will do. Casino operators have asked for smoking lounges to remain legal. A decision is expected later this year.
While the overall trend in gaming revenue has been negative, slot machine revenue has reported mixed results. Slot revenue totalled $1.8bn in 2014, which was relatively flat from 2013 and in contrast to the 2.6-percent drop in overall gross gaming revenue for the year. In the first quarter of 2015 (latest available data), slot revenue was down 26.3 percent year-over-year, though that decline was not as pronounced as the 36.5-percent fall in total gross gaming revenue. Slot revenue’s share of total gaming revenue has increased to 4.5 percent, up from 3.8 percent in the first quarter of 2014.
Amid Macau’s tumbling gaming numbers, the Chinese government recently relaxed visitation rules to its Special Administrative Region. The revised rules allow residents of mainland China to visit Macau twice a month instead of twice every 60 days. The revision also extended the maximum length of stay from five days to seven days.
Gaming revenue could see a boost over the next two years as six properties are due to open by the end of 2017. However, new casinos could be hindered by Macau’s cap on live table games, which limits annual growth in the number of tables to 3 percent. New properties are planning to add between 400 and 500 tables, but those numbers could be optimistic given the recently opened Galaxy Macau Phase 2, which was granted only 150 tables after requesting 400. The table game cap could spur greater installation of slot machines along with continued expansion of stadium-style electronic table game (ETG) areas. Live dealer ETG multigame areas allow casinos to operate dozens of gaming terminals that count only as a single table game for regulatory purposes. Te industry abroad is continuing to evolve.