What: The share price of casino operator Echo Entertainment Group Ltd (ASX: EGP) has sunk 6.3% to a low of $4.80 at the close after the company held its annual general meeting (AGM) on Wednesday.
So What: While the release of the AGM's speeches and presentation was not deemed "market sensitive" it would appear that the investors viewed the trading update for the four months ending October 31 as uninspiring and cause for some concern.
Here's what the Managing Director, Mr Matt Bekier had to say in the Trading Update:
- Positive momentum and focus on the domestic business created over the last 24 months is continuing to drive results into FY16
- Across the group, year to date total domestic business, including non-gaming but excluding International VIP Rebate, grew by 8.7% on the prior comparable period (pcp) which included revenue from the Townsville property for the first three months
- On an actual basis, Echo has experienced an abnormally low win rate for the International VIP Business, with an actual win rate of just 1%. This has resulted in actual VIP Rebate revenue being down 33.8% on the pcp (and down 8.1% on a normalised basis)
Now What: Some shareholders are obviously disappointed with the performance of Echo over the first four months of the financial year, particularly regarding the VIP business. When considering the operations of Echo, however, it's important to remember that business models based on gambling are all about the odds.
Like casino peer, Crown Resorts Ltd (ASX: CWN) and betting service providers Tatts Group Limited (ASX: TTS) and Tabcorp Holdings Limited (ASX: TAH) it's the long-term win rate for the group coupled with volumes which ultimately matters; short term actual win-rates can often just be a distraction.
So long as these firms can entice a growing turnover from clients, the odds are stacked firmly in their favour to grow profits.
