Bernstein Says A Few Macau Stocks Are Worth A Bet

Long-suffering Macau casino stocks might merit a bet, but their fast-growth days are done, an analyst said Monday. Bernstein's Vitaly Umansky forecast that Macau's deceleration in revenue growth is now in a trough, with a bottom coming in late 2015. The hyper-fast growth of 17 percent from 2010 to 2014 won't likely return, but Umansky predicted a resumption to 9 percent between now and 2020. From the silver-lining department: a shift to relatively high-margin mass-market customers from lower-profit VIP gamblers will drive growth in operating earnings to 13 percent by 2018, Umansky said. Partly based on their mass-market focus, Umansky rated two players at Outperform; Melco Crown Entertainment Ltd.

with a $32 target and Sands China Ltd.

with a $40 target on the Hong Kong exchange. Macau operators with weather their current trough with an ability to pay dividends intact, but at least two are at risk of retrenchment according to Umansky. MGM Resorts International

might cut its payout ratio to 50 percent, from a historical average of 94 percent, while Wynn Macau

could see its ratio reduced to 80 percent from 111 percent, Umansky said. Also at market perform in Umansky's book: Galaxy Entertainment Group Ltd.

and SJM Holdings Ltd.

. Galaxy is focused on low-margin VIP revenue, while SJM has "governance concerns" and little presence in Macau's emerging Cotai development.