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Macau casino stocks Melco Resorts & Entertainment Ltd (ADR) (NASDAQ: MLCO), Wynn Resorts, Limited (NASDAQ: WYNN), Las Vegas Sands Corp. (NYSE: LVS) and MGM Resorts International (NYSE: MGM) have been on fire in 2017, but recent reports over junket liquidity concerns in Macau triggered a significant pullback in the stocks in the past week.

While junket concerns will likely limit the upside in Macau casino stocks in the near-term, rising gaming revenues will also limit the potential downside, Nomura analyst Harry Curtis wrote on Monday.

Curtis said the reports of a junket liquidity crunch will have “little impact” on gross gaming revenue.

“We chatted with several senior gaming executives in Macau who commented that, while the communication is unusual, account freezing by Chinese banking authorities over the past few years is not,” Curtis wrote.

Related Link: Casino Stocks 101: What Is A Junket?

In other words, bank account freezing may have spooked investors, but it hasn’t seemed to hurt casinos’ bottom lines. Macau has registered 11 consecutive months of positive gaming revenue growth, including a 25.9 percent jump in June.

While Curtis said investors can breathe a sigh of relief about the junket concerns, the possibility of softening gross gaming revenue growth is the real risk in Macau. Macau faces some tough year-over-year comparisons starting in Q4, and slowing revenue growth may trigger multiple compression in Macau casino stocks, Curtis warned.

Overall, Nomura is most bullish on the Macau stock with the least amount of exposure to Macau: MGM. The firm maintains a Buy rating on MGM and Neutral ratings on Melco, Wynn and Sands.

Disclosure: the author is long MLCO.

Latest Ratings for MLCO

Feb 2018Goldman SachsUpgradesNeutralBuy
Nov 2017Daiwa CapitalUpgradesHoldBuy
Nov 2017NomuraMaintainsBuy

View More Analyst Ratings for MLCO
View the Latest Analyst Ratings

Posted-In: Harry Curtis Macau NomuraAnalyst Color Analyst Ratings Best of Benzinga


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