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Iao Kun Down to Strong Sell on Low Rolling Chip Revenues - Analyst Blog

On Jan 21, 2014, Zacks Investment Research downgraded Iao Kun Group Holding Company Limited (IKGH) to a Zacks Rank #5 (Strong Sell). The company has been witnessing downward estimate revisions after reporting disappointing Rolling Chip Turnover for the month of December on Jan 5, 2015.

Why the Downgrade?

The company’s Rolling Chip Turnover of $0.71 billion plunged 48% year over year — the third consecutive monthly decline — comparing unfavorably with 27% and 30% decrease recorded in Oct and Nov 2014, respectively. Win rate for December was 4.56%.

Further, Iao Kun Group’s Rolling Chip Turnover for 2014 was $16.60 billion, down 3% year over year. Also, it was below the company’s expected range of $16.80 to $17.5 billion. The downside reflects slower revenue growth of VIP baccarat in addition to economic downturn and tightening of credit in mainland China, where the majority of the company’s VIP gaming patrons reside.

In addition, Iao Kun Group, which is engaged in the promotion of five major luxury VIP gaming facilities in Macau, exposes it to the sluggish economic conditions in the region. VIP gamblers in Macau are curtailing expenditures due to a cooling Chinese economy.

Also, the slowdown can be attributed to a nationwide crackdown on corruption in the country that compelled Macau officials to impose restrictions on VIP gamblers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.

Unfortunately, the worst is not over in Macau and as a result Rolling Chip Turnover would decline further in the upcoming months.

Stocks to Consider

Better-ranked stocks in the same industry include Isle of Capri Casinos, Inc. (ISLE), Boyd Gaming Corp. (BYD) and Zynga, Inc. (ZNGA). While Isle of Capri sports a Zacks Rank #1 (Strong Buy), Boyd Gaming and Zynga have a Zacks Rank #2 (Buy).


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IAO KUN GROUP (IKGH): Free Stock Analysis Report
 
BOYD GAMING CP (BYD): Free Stock Analysis Report
 
ZYNGA INC (ZNGA): Free Stock Analysis Report
 
ISLE OF CAPRI (ISLE): Free Stock Analysis Report
 
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Zacks Investment Research