Nomura Cuts Targets On Macau Casino Names Across The Board

Nomura Equity Research released a new report this week that included the firm’s updated outlook and price targets for Macau casino operators.

According to analyst Harry Curtis, shareholders have little reason for near-term optimism when it comes to Macau.

The Latest Numbers

The Nomura report included the firm’s latest gross gaming revenue (GGR) estimates for Macau casino operators. According to the report, Nomura is projecting June GGR to fall 34 percent year-over-year (Y/Y) compared to a 37 percent Y/Y decline in May and 39 percent Y/Y declines in March and April.

Macau’s average daily gaming revenue (ADR) for the week of June 8-14 came in 19 percent higher than the previous week’s numbers, which represented the worst week so far in 2015. June’s ADR numbers (tables only) are tracking 15.1 percent lower than May.

Related Link: Casino Stocks Up; Analyst Sees 'Green Shoots' In Macau

Nomura’s projection of a 34 percent Y/Y GGR decline in June is based on an assumption of HKD 600m ADR for the remainder of the month.

Commentary

Many Macau bulls have argued that the opening of new resorts in coming months will create a renewed interest in Macau and an increase in business, but Nomura remains unconvinced.

“With imminent earnings cut risk (as consensus expects a 12% increase in Jun-Dec vs Jan-May) and unattractive valuation (2015F P/E of 19x), we maintain our bearish stance,” analyst Richard Huang writes.

Target Reductions

Nomura’s EBITDA projections through the end of 2016 are about 10 percent lower than consensus estimates. The firm cut its price targets for Macau casino operators across the board.

Nomura now has a $24 target for MGM Resorts International MGM, a $108 target for Wynn Resorts, Limited WYNN, a $50 target for Las Vegas Sands Corp. LVS and a $18 target for Melco Crown Entertainment Ltd (ADR) MPEL.

Disclosure: the author owns shares of Melco Crown Entertainment.