Macau Casinos Exposed to China’s Credit Woes
China’s credit crunch resulted in a number of Macau casino stocks getting hammered on Monday.ntee, rendering most non-nut draws essentially useless.
Macau generated an average of HK$775 million a day for the week ending June 3, down from $1.1 billion the week before, notes Ben Levinsohn of Baron’s.
Monday’s casualties of the selloff included the likes of Melco Crown Entertainment (MPEL), which has dropped 8.4% to $20.61, Las Vegas Sands (LVS), falling 6.4% to $48.95, MGM Resorts International (MGM), which dipped 6% to $12.98 and Wynn Resorts (WYNN) was off 4.5% to $123.90.
Nomura’s Henry Curtis, Louise Cheung and Brian Dobson call the selloff a buying opportunity. They write:
Thus far, the stocks have declined but gaming volumes have not…Over the weekend, we spoke with several casino managers in Macau and are encouraged by several facts: 1) Gaming volumes were very strong in 1H June. Last week’s pullback is due more to mean regression than customers pulling back; 2) Recent visitation has been up 9%; 3) Yields to junket capital providers have declined from ~18% to ~13% recently indicating confidence, not weakness in collections. Overall liquidity remains high; 4) Mass volume growth remains strong at 28–32%; and 5) Supply growth of zero thru mid/late 2015 implies that yield/table/day will increase unless economic growth in China slows to a halt, which is surely not the objective of Beijing.
- Aaron Goldstein, Gambling911.com
