Equity Update

Devil’s stocks outperform!, we now take a deeper look at the Casino/Gaming industry. As we highlighted in that article, Casino/Gaming stocks have underperformed versus the MSCI world index over the past five years, but there are great divergences within the industry.

Casino/gambling stocks can be divided into traditional casinos being: 1) actual casinos with related hotels and restaurants; and 2) online gambling, which are pure play online companies offering betting on sports, poker and casino.

In charts 1 and 2 we show the 1 year performance of the MSCI index and the share price development of online gambling companies and traditional casinos, respectively.






While all the traditional casino stocks in chart 2 have outperformed the MSCI world index, some of the online gambling companies have underperformed significantly (chart 1), namely Bwin and Sportingbet losing significant value (60 percent and 20 percent, respectively). Much of the online gambling underperformance stems from licensing rounds in Europe. The best performers within traditional casinos, on the other hand, are driven by emerging market growth (Macau).

Looking at risk (Net debt/EBITDA) and valuation (P/E) in chart 3, Online gambling companies stand out with negative net debt levels (positive cash holdings). Looking at chart 3 on a stand alone basis, bet-at-home appears most attractive, due to its low valuation and negative net debt. The more expensive traditional casinos, such as Wynn Resorts or Sands China, have higher growth expectations over the next three years, and therefore are traded at higher multiples.


So as an investor, the choice is either to go for cheaper online companies (with the licence round risk) or the traditional casinos riding the Macau growth wave.

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Stong USD To Come, While Global Stocks Are Falling

Global stock market extended losses during Asian hours after poor number in US jobs reported on Friday and continuing sovereign debt concerns. HSI is down more than 2.8%, NIKKEI -1.8% CHINA -1.9% and KOSPI more than 4% in red.
Based on he wave structure shown on S&P500, oil and Treasurys, we believe that risky assets are headed lower in this week. As such, we US dollar should strengthen in this week against the other major currencies.
Usd/Chf intra-day
Usd/Chf formed an extended wave v) within wave (a) about we warned you in the past intra-day update. well, price as we can see recovered quite sharply from 0.7710 so we think that an impulsive decline from the top is complete and that three-wave corrective bounce is underway, which will be a blue wave (b). we will be looking for another sell-off once we will be able to recognize end of a corrective recovery, which may find resistance somewhere around 0.80.
Aud/Usd intra-day
Aussie moved nicely lower from 1.0786 where pair shows evidence of a larger completed corrective recovery. In fact, even a sell-off from the pick appears impulsive, so we believe that this pair is headed even lower. As such, we favor higher US dollar while pair trades below 1.0768.
Forex Analysis by Gregor Horvat at ForexPros. com

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