Product and Service

Companies included in casino sector in gambling industry primarily develop and operate integrated resorts earning revenue from casinos, accommodation, food, and retail.  


Demand for Product and Service

As indicated by the typical company data, the demand for gaming and related service has been weak in US but presented a rebounding sign recently. Demand in Macau completely bounced back.

The Sector

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend
  1. Demand for gaming and related service seems to have been weak in most of regions in US in the past several years as indicated by the decrease in the same store revenue growth of some typical companies.
  2. There are signs for demand to rebound recently in US market.
  3. Companies’ performance in term of gaming revenue has been better in west regions, especially in Las Vegas, than other regions of US during the same period of time and this trend seems to be more apparent since 2017.
  4. Strong increase has come back in Macau since 2017 after a few of years’ sluggish performance.
  5. Mid Atlantic has continued to provide poor performance during the same period of time.
  6. Consolidation activities increased probably because companies want to take use of current low purchasing costs before they go up.
Causes behind the trend
  1. Local economy situation in US may be the major drivers behind the growth in revenue of those companies in this sector.
  2. Competition, with other type of gambling and internet gambling and due to loosing government regulation as indicated by the increased licenses, may be responsible for declining revenue of those companies.
  3. China’s economy and regulation of politics determine those companies’ performance in Macau.
Industry Future
  1. Supported by favourable factors from macro-economy and global travelling, demand in this sector may bounce back in US market.
  2. In long run, Macau market will benefit from China’s visitors.


General Financial Performance of Companies In the Sector

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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