Casino Stocks Under Pressure Amid Chinese Crash, Media Reports
Casino stocks, particularly those with a strong presence in Macau, continued trading lower early Thursday morning following a concerning report by The Wall Street Journal.
According to The Wall Street Journal, casino revenue in Macau has now fallen for the 19th consecutive month. The publication cited China's slowing economy and a corruption crackdown - both of which are "putting off" a recovery in the world's largest gambling region.
The Wall Street Journal added that total visitors to Macau dipped 3.1 percent during the first 11 months of 2015. However, visits to the region did improve during the second half of 2015 after the Macau government eased visa requirements for mainland Chinese visitors.
Meanwhile, an influx of 4,000 new hotel rooms in Macau throughout 2015 resulted in a 17.8 percent dip in room rates during November compared to the same month a year ago.
Stifel: Casino Operators With 'Disproportionate' Exposure Outside Of Macau To Outperform
Steven Wieczynski of Stifel commented in a note on Wednesday that casino operators with a "disproportionate" exposure to markets outside of Macau should outperform casino operators with substantial assets and exposure to the Macau market.
The analyst is projecting gross gaming revenue in Macau by another 16 to 11 percent in 2016.
"Although it was once believed Macau would be a supply-driven growth story, we now expect the scheduled new supply additions to require a multi-year ramp cycle, which could create some noise in the market over the next 12 to 18 months," Wieczynski wrote.
Wieczynski named MGM Resorts and Las Vegas Sands Corp as his "favored Destination Operator ideas" for 2016. The analyst cited the companies greater cash flow diversification outside of Macau and lesser reliance on Macau's VIP segment.
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