Analysis of the situation in the world gambling

Sophia Sullivan

The press regularly reminds us that we live in a world full of dangerous addictions, such as alcohol, drugs and gambling problem. The reality is that most people really like these pastimes, so people incorporate them into their lives without becoming addicted to them. In this article, we will analyze the situation in gambling statistics by types and regions, together with industry expert - Warwick Bartlett, Executive Director of Global Betting and Gaming Consultancy (GBGC). GBGC is one of the largest and most trustworthy gambling specialists in the world. The company has experience of cooperation with more than 500 customers and always brings a complex gambling news.

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Gambling statistics by region

Let's start with some retrospective data and discussions about how the situation has changed.

Elliott: As you know, gambling games as well as gambling software is more common in Asia, North America and Europe than in other regions. And while gambling continues to develop rapidly in Asia and North America, in Europe it has finally stabilized. Among other regions, Africa is the fastest regarding the development of the gambling market as the latest gambling news reports say.

Table 1. Gambling by revenue gross from the regions (GGY)*

Region

Forecast for 2018, million dollars

Dynamics, 2010-2018, %

Asian/East

134 518

17

North America

128 846

17

Europe

114 692

4

Central/South America/countries of the Caribbean

29 084

11

Oceania

20 339

7

Africa

6305

18

Total for all countries of the world

433 784

12

Source: Global Betting & Gaming Consultants (GBGC)

* The amount of bets minus payments to players (winnings)

Gambling by types

After the global collapse in 2009, gambling continued to show a trend in terms of improving overall gambling statistics. Online gambling was not "frozen" in 2009, but, on the contrary, continued to move forward with leaps and bounds. Some surprise causes a significant reduction in the profitability of gambling machines (slots, video poker etc).

The gross profitability of slot machines fell by 15.5% as a whole. If you look at the regions, Asia recorded the largest drop (-45%), followed by Oceania (-2%). In Europe and North America, growth rates were respectively 4 and 9%. In South Africa, there was the largest growth rate — 84%, but this is the smallest market in compare to the ones stated above.

However, it seems that Americans and Europeans prefer slot machines, while most Asians prefer board games and pachinko.

Table 2. Gambling Statistics by types (GGY)

Type

Forecast for 2018, million dollars

Dynamics, 2010-2018, %

Casino

148 197

19%

Lottery

138 480

29%

Slot machines

76 499

-15%

Betting

58 534

11%

Internet betting

44 800

38%

Other types (bingo, etc.)

12 075

7%

Total for all countries of the world

433 784

12%

Source: Global Betting & Gaming Consultants (GBGC)

Gambling by country

Next we will consider gambling by country. In general, the US eclipses other countries with more than $100 billion in terms of annual bets. The closest country to the US in terms of indicators is Japan with $34 billion. Not surprisingly, per capita, Macau is the largest. Although Singapore and Australia are "target" countries of the gambling industry, they are far behind Macau.

Table 3 provides data on the largest casinos in the world. If you look at the share of slot machines and card / desktop games, it should be noted that in the US, gaming machines take 94%, while in Macau - only 67%. Of these casinos, the Galaxy has the largest gross revenues from bets.

Table 3. Largest Casinos

Casino

Area of the gaming zone, sq.  ft

Slot machines

Card/Table games

Bars

Hotel Rooms

The Venetian Macao

546 000

3000

870

24

3000

City of Dreams (Macau)

420 000

1350

520

14

1400

MGM Grand Macao

221 952

835

410

12

593

Sands Macao

229 000

750

1.000

7

51

Foxwoods (US)

340 000

7000

400

29

824

MGM Grand Las Vegas

170 000

2300

178

20

5044

Borgata Hotel Casino (US)

161 000

4100

285

17

2002

Point 16 (Macau)

270 000

320

150

3

423

Tusk Rio (S. Africa)

266 000

257

12

2

-

Casino Lisboa

165 000

1000

26

7

1000

Marina Bay Sands (Singapore)

160 000

2500

500

24

2561

Source: 1Top 10 Casino Websites, GBGC

Special questions

Elliott: Will the opening of the Hong Kong-Zhuhai-Macau bridge generate significant gambling revenues in Macau?

Warwick: I believe that this will happen, but there are operators in Macau who believe that the main advantage will be achieved due to the increased demand for Meetings, Incentives, Conferences and Events (MICE). The point of entry to Hong Kong is located near the airport of Hong Kong, so delegates will be able to fly and take a taxi directly to Macau. To date, you need to get there by speed boat, but this is not a very easy task when you have heavy suitcases. Currently, Hong Kong is still the best place for MICE, but Macau should take the share of this market after the opening of the bridge.

Simplifying the transport infrastructure, in my opinion, is definitely an additional impetus for commercial activities. We must remember that Macao is also developing as a resort. Despite impressive performance, it is not yet an ideal place for entertainment and recreation. A greater number of attractions will create new grounds for whole families to travel to Macao. Beijing expressed interest in expanding the proposals from Macau; in Macau, there are now 19 Michelin-starred restaurants.

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Elliott: I understand your point of view about MICE-travelers. The same will happen with the new Wynn casino near Boston. From the airport in the casino a new subway line is laid. The casino can also be reached by subway to the center of Boston. What are the prospects for increasing demand for Macao in cities west of the enclave, for example, in Wuzhou?

Warwick: The population of Wuzhou is 3.2 million people. And with a visa, I'm sure the locals will want to visit Macau.

Elliott: Gambling in the regions of New England / New York, USA: Is there a need for even more casinos? In Connecticut, there are already two major gambling establishments: Mohegan Sun and Foxwoods. Since 2011, the turnover of each significantly decreased: Mohegan Sun - by 17%, and Foxwoods - by 24%. The new Wynn casino, located outside of Boston, will house 3,000 slot machines, 150 gaming tables and 600 hotel rooms. The new MGM casino in Springfield will have 3,000 slot machines, 75 gaming tables and 250 gaming rooms. Wynn Casino will be only 105 miles from Connecticut's gambling facilities, while MGM will be only 73 miles from there. It is interesting to know whether these four casinos will be in demand there. I believe that new institutions will rely heavily on older Connecticut casinos.

Warwick: If you look at countries with more than 5 million people (Table 4), you will see that the gambling ratings per capita in the US are quite low. They should be higher than Canada's, but limited supply holds numbers. As a consequence, I believe there are opportunities for expanding the market and creating a higher tax rate.

Table 4. Gambling in large countries, 27

Country

GGY US$

GGY per capita

Australia

17 325,82

724

Hong Kong

4073,80

557

Canada

13 419,19

375

Finland

1960,51

358

USA

105 114,61

327

Italy

19 549,44

322

United Kingdom

20 274,53

311

New Zealend

1439,39

310

Japan

34 364,69

271

Norway

1226,38

236

Source: Global Betting & Gaming Consultants (GBGC)

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Elliott: Perhaps you are right. But I guess that new casinos will attract a large number of players from existing casinos, which will lead to a significant decline in the turnover of Foxwoods and Mohegan Sun. I heard the gambling news that casino clubs are turning into "Disneyland with discount stores." Is this a global phenomenon?

Warwick: The United States leads the world in the complex development of casinos as a result of reasonable taxation in Nevada, which led to the creation of a very competitive market that creates innovations. At an early stage, Las Vegas survived due to the accumulated demand for gambling, because several states introduced gambling, with the exception of races. Now everything different. The casinos admitted that their customers needed more than just gambling for entertainment. This means that people need good restaurants, shopping, shows and a variety of activities.

Elliott: I see that everything happens a little differently. US gambling establishments are moving to the "complex development of resorts" format, because the demand for a kind of gambling, which they offer, is not there. It's a desperate game. Foxwoods moved to a shopping center at a reduced rent in the hope of avoiding bankruptcy. What are the most significant consequences of the growth of online gambling and how will this affect other forms of gambling and will it bring a gambling problem?

Warwick: The strength of Las Vegas is that it stays up to date. Over the past 20 years, the largest US cities offering entertainment events have grown significantly, and a new target audience of millennials is not so interested in gambling, so you have to offer what they want.

Investment opportunities

Warwick: The most important factor in investing in gambling is government intervention, either through regulation or through taxation. Some say that this applies to all businesses. It's true. But the difference is that government agencies do not like to gamble, so they do not consider gambling as a public good. They can develop a punitive legislation without fear of losing political influence.

Elliott: Table 5 provides information on the possibilities for investing in gambling. I highlighted what's bothering me with red. Payout ratios in excess of 100% are not sustainable. I am also concerned about companies that lose money. In addition, as reported above, the sales of slot machines fell down. In your opinion, what is an attractive factor?

Warwick: You have successfully noticed the issue of the ratio of payments and the fact that companies have large debts. In Las Vegas Sand (NYSE: LVS) Sheldon Adelson and his wife Miriam own about 20% of the shares. And in 2008, Adelson saved the company from bankruptcy with his own money, so I have less fear than the majority regarding the dividend payout ratio for LVS.

Operators of integrated resorts, thanks to their huge investments, can cooperate with authorities in order to settle tax rates and certain conditions that will allow businesses to succeed. Even so, who would have thought that the ban on smoking in Macau along with visa restrictions, as well as suppression of bribery would affect Macao, as we see it now? As a result, over the past three years, we have seen that Macau shares have decrease by 13%.

Table 5. Gaming companies

Casino

Company

Stock code

EPS (USS)

P/E

Dividends, %

Stock price, %

Capitalization (USS millions)

Revenue

Payouts

1-st year

2-nd year

Genting Malaysia Berhad

GENS SP

0,12

11

1,65

27

36

34

7500

MGM Resorts

MGM US

1,92

14

1,40

23

41

26

17 700

Kangwon Land

035250 KS

1,99

16

2,77

44

-15

2

6050

MGM China Holdings

2282 HK

0,10

21

1,70

34

40

-45

795

Las Vegas Sands

LVS US

2,10

27

5,39

137

27

-13

47 900

Sands China

1928 HK

0,15

30

5,91

167

19

-39

37 132

Galaxy

27 HK

0,19

32

0,98

21

95

-30

25 630

Wynn Resorts

WYNN US

2,38

51

1,54

84

44

-25

13 600

Wynn Macau

1128 HK

0,04

63

4,86

200

53

-40

11 873

Average data

 

1,00

29

2,91

82

38

-14

19 482

Online/iGaming

Company

Stock code

EPS(USS)

P/E

Dividends, %

Stock price, %

Capitalization (USS millions)

Revenue

payouts

1-st year

2-nd year

Betsson

BETSB SS

0,76

12

-

-

8%

-3%

1372

Playtech

PTEC LN

0,61

13

3,74

56

11

57

38 717

Amaya

AYA US

0,70

23

-

-

14

-24

2600

Kindred group PLC

KINDSDB

SS

0,05

200

0,00

89

4

125

2510

888 Holdings

888 LN

18,31

18

2,46

55

10

109

1161

Bet-at-Home.com

ACX:DE

4,83

25

2,45

52

64

362

876

Leo Vegas

LEO:SS

0,16

30

1,65

75

78

-

730

Aristocrat Leisure

ALL AU

0,43

31

1,44

42

58

295

16 670

NetEnt

NETB SS

0,50

36

2,90

10

4

163

2230

Ladbrokes Coral

LAD LN

-0,22

-

1,17

-

-14

-18

2820

500.com

WBAI

-0,62

-

-

-

-38

-67

456

Paddy Power Betfair

PPB ID

-0,09

-

3,65

-

-19

53

9820

GVC

GVC LN

-0,58

-

-

-

22

75

2934

Average data

 

1,91

-

1,50

-

16

86

6377

Van Eck Vectors Gaming ETF

BJK US

-

22

2,62

 

20

-20

36

Sources: Morningstar, Yahoo Finance

Warwick: Consider gambling companies over the internet and a rise in stock prices over the past three years: Playtech (OTCPK: PYTCY) + 54%, NetEnt (OTCPK: NTNTY) + 38%, 888 Holdings (OTCPK: EIHDF) + 33%. The reasons are the convenience of using online gambling software and the proposed cost:

- application extensions via mobile phones and tablets;
- offshore territories with low taxes;
- Confidentiality - no one will know that you are gambling.

In the future, representatives of the authorities will agree that they have lost control over gambling problem. European countries already adopting legislative acts at the state level. Operators must be licensed within the jurisdiction and pay taxes. Regulation is costly and time-consuming, and punishments for misconduct are high. And also there is a deep concern about the gambling problems of the players and the one who eventually has to pay for the treatment of players with gambling problem. In the United Kingdom, the UK Gambling Commission instructed the Remote Gaming Association to create a gambling software that allows a player to close their accounts on a regular basis (by activating the software player will not be able to enter gambling apps and websites online).

Table 5 shows that during the last three years, most of the growth in gambling stocks fell on shares of online gambling. The majority of the most effective leading operators declare the growth of indicators in half. This was achieved due to the convenience and value to the player, definitely, in the best way that I have met in my life. Convenience in the UK appeared due to mobile gambling software, where smartphones allow the player to bet directly during football matches, without getting up from the chair. Currently, 60% of online gambling accounts made for sports betting.

As for the casino, the leading role is played by Japan and the implementation of four complex resort casinos. The two largest resort hotels are likely to bring $2 billion in profits without tax deductions. On an example of profit of LVS for 2016 which is equated to 100% from the sum before payment of taxes.

Every major gambling operator is aiming at Japan. And it would be easy to follow the example of LVS, but in the gambling industry you never know for sure, so it can be safer to go by the road of VanEck Vectors Gaming ETF (NYSEARCA: BJK). 38% of the 10 largest holdings are in the shares of the casino. To date, they have 20% of the gambling market share, so, many speculation in Japan is already included in the price.

Elliott: I understand why you like Playtech. Its numerical indicators are in order and, it seems, is a well-organized firm. I'm surprised that you did not recommend Genting Malaysia Berhad (OTC: GMALY). Its performance looks good, and it probably has a unique market without competitors. Do you think it will participate in bidding for Japanese concessions?

Warwick: Genting Malaysia Berhad surprised everyone when it won one of two licenses in Singapore. Company decided to leave South Korea to concentrate on Japan, and this is the answer to your question. GMB operates throughout the United Kingdom and owns the Resorts World Casino in New York. Company does not have too much debt, and certainly this company will qualify for benefits in Japan. The share price has increased by 36% this year.

But your question confirms the fact that with so many good companies applying to Japan, investors should pay attention to Van Eck Vectors Gaming ETF.

Elliott: I agree that VanEck ETF allows everyone to "hedge their bets." All companies, except for the four companies listed in Table 5, belong to the ETF.

Conclusion

People adore gambling, and this is a huge emerging industry. But patterns change. And the casino, realizing that their markets will expand very much, if they take into account all business directions and will evolve into complex casino-resorts. Also, you should not forget about the possible gambling problems.