Citi Slashes Price Targets For Raft Of Macau Casinos

Target prices on a big raft of Macau casinos were slashed by double digits at Citi Research Friday in the face of shrinking revenue.

"We remain bullish on the sector but it's prudent to reset expectations" in light of lower revenue, Citi's Anil Daswani said in a note Friday.

High-profile arrests of senior mainland government officials in an ongoing and broadly-based Chinese corruption crackdown has apparently convinced high-rolling gamblers to lay low. Meanwhile, the more plebeian mass market customers are holding their purse strings tight.

Total casino revenue in the former Portuguese colony fell 3.6 percent last month, followed by a similar June decline, according to China's government figures.

"The clampdown on corruption is having a sustained impact on the VIP side and we see no catalysts for a rebound," Daswani said in a note that cut his VIP revenue forecast for Macau to a 13 percent decline for the second half of 2014, from a five percent decline.

In the mass market, "there's no explicable driver" for the growth slowdown "and we're still not sure if this is an inflection point," said Daswani, who lowered his growth forecast for the category to 13 percent from 35 percent for the second half of 2014.

The last time Macau saw a significant revenue decline was September 2008, when the growth rate fell to five percent from 33 percent and remained weak for a year, Daswani said.

Citi slashed its price target for all 14 Macau casino stocks it follows.

Among them Galaxy Entertainment's GXYEY target came down 17 percent to $71; Las Vegas Sands' LVS target dropped 12 percent to $82, Louis XIII Holdings Ltd. down 30 percent to $8.50 and Macau Legend
MALDF down 21 percent to a $3.70.

Other Citi target price cuts included Wynn Resorts' WYNN by six percent to $46 and MGM Resorts International's MGM SJM's SJMHF also by 6 percent to $32.