Macau casino stocks Melco Resorts & Entertainment Ltd (ADR) MLCO 2.73%, Wynn Resorts, Limited WYNN 0.45%, Las Vegas Sands Corp. LVS 1.59% and MGM Resorts International MGM 0.75% 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.
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…
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