Wells Fargo Discusses N-T Implications For Macau Gaming Sector

Wells Fargo analyst Cameron McKnight commented on the volatility in Macau in regards to the gaming sector. The analyst reiterated Outperform ratings, noting the probable 10 percent near-term downside risk for

and

.

McKnight sees the potential for an approximate 10 percent near-term downside risk for Las Vegas Sands and Wynn due to “2012 experience and our ''scorched earth'' valuation”, with shares of Melco Crown

already valued at the bottom. The analyst added that none of his concerns are “permanent or thesis changing. We remain bullish on the medium to long-term secular growth story as we believe Macau is still significantly underpenetrated, and we can see Macau reaching $115B of revenues by 2018.”

Wells Fargo does not expect “significant” earnings beats in the second quarter. Using negative one percent growth in June (negative 15 percent VIP and 30 percent mass) and market share prices as of June 15, the analyst estimates are 3%/6%/0%/5% below consensus for LVS/WYNN/MPEL/MGM, respectively. Over the summer, McKnight expects “-1%/7%/10% yr/yr growth in June/July/August, implying month/month sequential growth of -14%/13%/7% vs. historical growth of -9%/8%/6% (ex-2010 World Cup). It is important to note that during the last World Cup in 2010 June/July/Aug 2010 sequential growth was -20%/+20%/-3%. With an easy 2013 yr/yr VIP comparison in August of 8%, we believe 10% yr/yr growth in August is possible (0% VIP, 30% mass).”