Macau gaming stocks surged Monday after analysts at Union Gaming Research Macau suggested that now is the time for investors to start buying the stocks of battered Macau casino operators. With the stocks down an average of 50 percent in the last year, analysts believe that they have finally reached a bottom.
Shares of MGM Resorts International MGM 2.59%, Las Vegas Sands Corp. LVS 1.6%, Wynn Resorts, Limited WYNN 1.01% and Melco Crown Entertainment Ltd (ADR) MPEL 0.48% were all up more than 4 percent during Monday’s trading session.
Stocks Bottom Before Revenue
Union Gaming analysts believe that gross gaming revenue in Macau will continue its decline into 2015, but they believe that the bad news is already priced into Macau stocks. The report urged investors to go ahead and “get back in” to Macau gaming stocks.
Change For The Better
Analysts believe that investors have been too negative and focused on the downside of the Chinese government crackdown on gaming operations in Macau. While the landscape of gaming in Macau will certainly be different than it was in the past, analysts believe that the change will be for the good.
Opening The Door For Cautious Investors
In the short-term, VIP gaming revenue in Macau has suffered as questionable practices such as proxy betting, side betting and currency exchanges have become marginalized, but Union Gaming analysts see the long-term benefits to these changes.
“While the immediate effect of this has resulted in a substantially lower VIP top line, we think the longer term effects are almost universally positive.”
Analysts believe that the recent Macau “cleanup” and higher level of government oversight will now open the door for investment from foreign sources (such as American hedge funds) that were previously unwilling or unable to invest in Macau for regulatory or due diligence reasons.
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