Market Overview

Casino Analyst: 'Macau Is Not Empty'


Macau casino management teams remain cautious, but uncowed even as February gaming revenue for the gambling mecca came in 48 percent below a year earlier, an analyst said.

"Macau is not empty. General traffic patterns around the properties felt okay." said Bank of America analyst Shaun C. Kelley, who recently visited the former Portuguese colony a few dozen miles from Hong Kong.

Kelley trimmed his estimated operating income for Wynn Resorts Limited (NASDAQ: WYNN) by 15 percent and by 1 percent for both MGM Resorts International (NYSE: MGM) and Las Vegas Sands Corp. (NYSE: LVS).

MGM and Wynn shares were off recently by more than 3 percent at $20.78 and $132.22, respectively; Sands traded down 2.75 percent to $53.58.

Kelley maintained a Neutral rating on Wynn and cut his price target by 6 percent to $155; he also reiterated a Neutral rating and $63 target on Sands and a Buy rating on MGM with a $25 target.

The analyst expects gaming revenue for all of Macau will decline by 10 percent for 2015. But if first-quarter trends continue, full-year gaming revenue would be off by 25 percent, Kelley said.

Local Macau casino managers "are cautious, but not overly fearful or bearish," Kelley said.

Blame for the slowdown continues to be placed on blow-back from a corruption crackdown by the Chinese government. But fears of restrictions on the number of visitors from the mainland under China's so-called Individual Visit Scheme are mostly dismissed by local managers, Kelley said.

Delays have been instituted on several major Macau transportation infrastructure projects, including a ferry terminal, light rail and on a series of bridges intended to link Macau and Hong Kong.

At the casinos themselves, "all the operators we met with mentioned some sort of sharper cost focus or efficiency initiative," Kelley said.

Cutting costs through labor attrition as well as more efficient marketing are under consideration.

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