Sector financial performance:

This company, which primarily develops and operates integrated resorts earning revenue from casinos, accommodation, food, and retail, has been grouped into casino sector in gambling industry.

It seems that demand, in US market, for casino and related service of companies in this sector, according to the typical company data, has been weak and slowed down in the past three years. It is probably a reflection in local economy of US as indicated by the fact that there are general decreases in mid-west, south, and mid-Atlantic regions but increase in west in the past several years.

Demand in Macau market started to take off after sluggish 2015 as indicated by some of typical company’s data (17-20% annual growth in revenue in 2017 and 2016).

While slow growth in US domestic, benefiting from cost saving and strong growth in Macau, the average gross margin, from the typical company data, seems to have been improved slightly. The current typical gross margin is about 37% in 2017. The typical operating margin is now at about 15% with a higher SG&A as percentage of sales of about 23% probably as a result of increased marketing spending.

The typical average stock Price/cash flow ratio is 37 ranging from 27 to 50.

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Company performance:

It seems that the demand for casino and related service of this company in Macao and Singapore in the past year has been growing quickly after sluggish performance in 2015 and 2016 as indicated by the same resort revenue increase.

The first three months of fiscal 2018 compared with the same period of 2017

Net sales increased 16.7% attributable primarily to increase of 20% in casino revenue from Macao and Singapore, increase of 12% in accommodation revenue from Macao and Singapore, and increase of 7.5% in food and beverage.

The fiscal 2017 compared with 2016 

Net sales increased 13% attributable primarily to increase of 15% in casino revenue from Macao (new resort) and Singapore, increase of 6% in accommodation revenue from Macao and Singapore, and increase of 9% in food and beverage.

Fiscal 2016 compared with fiscal 2015

Net sales decreased 2.4% attributable primarily to decrease of 3.4% in casino revenue from Macao and Singapore, offset by increase of 3.9% in accommodation revenue from Macao and Singapore, and increase of 2.2% in food and beverage.

Its gross margin (including depreciation) has gone up from 39% of 2015 to 42% in 2018 as revenue increased. And with the slight improved SG&A as percentage of sales (to around 12%), its operating margin went up to about 30% in 2017.

Stock price

This stock currently has a stock price/cash flow ratio of 29. We think that its stock is being relatively undervalued while uncertainty in Asia market, compared with its peer such as Melco Resorts & Entertainment Limited.