Feb 6 The 2% payroll tax cut expiration provides
another headwind for an already lackluster outlook for U.S.
casino operators, according to Fitch Ratings. Operators also
face cannibalization from new openings in select markets against
a difficult macroeconomic backdrop. The 4Q12 earnings season
should give us a sense for how the tax cut expiration is
affecting consumer behavior, which could also be affected on the
positive side by an improving housing market and declining
consumer debt levels.
Penn National announced earnings last week and reduced full
year 2013 revenue guidance by 1.6% from guidance announced in
tandem with the company's proposed REIT spin-off. The revision
is partially related to a slower than expected ramp up of the
company's Ohio facilities but also captures the uncertainties
surrounding consumer spending.
Taking into account new openings or expansions in Ohio,
Maryland, and Louisiana, we project same-store revenues to be
flat to slightly down for U.S. regional operators in 2013. Las
Vegas should fare better but only marginally with 3% growth.
With this backdrop and a limited number of available
development opportunities and sound risk/return profiles coupled
with the historically low interest rate environment, we expect
operators will focus on mergers and acquisition activity and
other engineering tactics in order to maximize returns for
shareholders. We highlighted this in our "2013 Gaming Outlook"
report released on Dec. 17, 2012. Subsequent to the release of
this report, Pinnacle announced plans to acquire Ameristar and
Scientific Games announced plans to acquire WMS. Prior to the
report, Boyd acquired Peninsula in November 2012 and Penn
announced a plan to spin-off its assets into a REIT (discussed
in our last eNewsletter).
Wynn and Las Vegas Sands paid sizable special dividends at
the end of 2012, partially because of tax uncertainty heading
into 2013 but also as a reflection of the lack of imminent need
for funding growth. We expect focus on generating returns for
shareholders will continue into 2013.
Conversely, our initial forecast calling for 8% gaming
revenue growth in Macau, as noted in our Asia-Pacific gaming
outlook report dated Dec. 17, 2012, driven by mass market growth
of roughly 20% and mid-single digit growth in VIP, which has
rebounded over the last couple of months. January revenue grew a
solid 7.3%, given the partial smoking ban implemented at the
beginning of the year in addition to an adverse calendar
comparison with respect to Chinese Lunar New Year. We are not
revising our revenue growth forecast at this point, as we have
a cautious view of the sustainability of the VIP rebound.