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Macau Casino Stocks Sink On Typhoon Floods, Analysts' Comments

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A raft of Macau gambling stocks were sinking Tuesday after more negative noise came from a couple of Wall Street analysts and a major typhoon grazed the city.

Wells Fargo's Cameron McKnight now expects September gambling revenue at the former Portuguese colony will drop by "the middle teens" compared with an earlier forecast in the "high single to low double digits."

The world's largest collection of casinos have been hurt by Chinese government crackdown on corruption that hit Macau's wealthiest customers especially hard.

Also Tuesday, Typhoon Kalmaeg grazed Macau and Hong Kong, flooding parts of downtown Macau and shutting ferries, as dozens of flights were cancelled. Wind gusts of more than 80 miles per hour were reported along with at least three injuries. Casinos were open for business.

But apart from a little rain, Macau gaming revenue won't finally hit bottom until the first half of 2015, according to Morgan Stanley's Praveen Choudhary.

Choudhary thinks Macau casino companies may be pressured to pay special dividends even as free cash flow growth declines and capital spending grows.

Among players in the sector, Choudhary said both Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL) and SJM Holdings Ltd. (OTC: SJMHF) are currently "cheap but lack catalysts" to spur the shares upward.

Wynn Macau (OTC: WYNMF) and Las Vegas Sands Corp. (NYSE: LVS) are "expensive" with benefits from current construction projects "already priced in," Choudhary said.

Sands and Wynn were each down nearly two percent around 12 p.m. EST Tuesday; Melco dropped nearly four percent and Galaxy Entertainment Group Ltd. (OTC: GXYEY) declined more than three percent.

Latest Ratings for MPEL

DateFirmActionFromTo
Feb 2017UpgradesEqual-WeightOverweight
Jan 2017UpgradesReduceNeutral
Jan 2017UpgradesNeutralBuy

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Posted-In: Cameron McKnight Morgan Stanley Praveen Choudhary Wells FargoAnalyst Color News Guidance Analyst Ratings

 

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