FANTINI’S FINANCE: Turning Tide in Macau?

Is the yearlong nightmare that has engulfed Macau over? The share value of gaming companies located there have jumped in the past couple of weeks and good news is finally coming from the government. And how about DFS? What impact will it have on gaming?

Macau casino stocks have jumped appreciably over the past couple of weeks, ending the plunge that had taken them all to 52-week lows.

Investors were reacting to a spate of hopeful news out of the national and Macanese governments, turning around the negative pressures that had driven down gaming revenues and stock prices for a full year.

We had suggested some weeks ago that the tone of conversation coming from the Macau government had changed from callousness towards the impact of falling revenues on casinos, to expressions of concern about the economic and employment impacts.

That, we said, could suggest a turning point. It now appears that is what happened. Consider these subsequent events: 

• Visa restrictions were eased for Mainland China visitors allowing them to visit more frequently and stay longer.

• The Macau government indicated it will not cap the number of Chinese visitors, as had been feared and, in fact, welcomes more of them.

• It appears the proposed smoking ban will allow casinos to retain smoking lounges.

Meanwhile, the government-pressured shift of Macau away from being table games—more specifically VIP and junket-centric—is occurring as evidenced by rising visitor volumes even as gaming revenues fall.

None of this means Macau is out of the woods. Recent actions are tentative and can be turned back.

However, they also suggest that the governments have gotten what they want, and the casino industry—now the casino resort industry—can resume growth.

But the road back might be long. It is clear that the opening of the new resorts on Cotai is being stretched out. That isn’t all bad given the cannibalization that would occur if they open in a no-growth environment, but it also means no quick rush of new business as was hoped when the half-dozen projects were conceived.

Further, it’s going to take a lot of tourists to make up for the missing VIPs who could drop hundreds of thousands or millions of dollars at one sitting. That volume of business will take a long time to build.

Thus, even if the governments have decided to be more accommodative, it raises the question of whether the rebound in the stocks doesn’t just get them back to a level that reflects the new realities.


The announcement that daily fantasy sports operator FanDuel has raised $275 million deserves the attention it’s getting, not just for the money, but for the names of its investors: Kohlberg Kravis Roberts, Google Capital, Time Warner, the Roy Disney family, NBC Sports Ventures and Comcast Ventures.

Rival DraftKings is reportedly negotiating a deal with Fox Sports.

The ramifications of these investments are several:

• They bring smart money to the industry.

• They provide the financial resources for FanDuel and DraftKings to continue burning money as they build the industry. FanDuel says its number of customers has tripled over the past year to 1.1 million.

• They bring respectable names to an industry that can come under attack as thinly disguised gambling.

They, plus the DraftKings and FanDuel alliances with the sports establishment, such as Major League Baseball and the NBA, also suggest the argument isn’t about gambling. It’s about who gets the money.

Past gambling expansions were a boon to the casino industry.

Daily fantasy sports is different. It is bringing in big investors and organizations that have more political clout than casino companies and the lone state of Nevada.

They might end up getting the lion’s share of this new revenue.

That alone could be a reason Nevada regulators might study daily fantasy sports and decide it is a form of gambling. If that definition is adopted, it could mean DFS falls under the federal Wire Act, which prohibits gambling on sports over telephone lines and, in our age, that means over the internet. At the least, it would alert anti-gamers in states where DFS operates without clear legal sanction.

That also would be an ironic twist, if Nevada gambling interests use gambling as a reason to squelch this new industry

The legal issues are more complicated than that, but the definition of gambling might be the ground upon which the battle is fought.


In a bit of an aside, we got a call from TransAct Technologies CEO Bart Shuldman about the quiet disappearance of Akiyoshi Isoi as CEO of JCM American, the company that led the revolution in adding bill validators to slot machines.

His departure deserves notice from an appreciative industry, Shuldman said. Thus, this note from Bart:

“Even through Aki eventually became a competitor to Transact Technologies, Inc., Aki and I maintained our friendship. I will always look for him at the industry trade shows, and every time I see someone inserting a $20 bill into a slot machine, I will know Aki was the person who helped make that happen.”

Articles by Author: Frank Fantini

Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.