CLSA released a report this week updating the outlook for the gaming industry in Macau. Despite a positive long-term outlook for Macau, analysts believe that things will get worse before they get better.

No Good News

Analysts predict that year-over-year (Y/Y) monthly gross gaming revenue (GGR) growth numbers in Macau will continue to be negative for the foreseeable future. Analysts want to see positive month-over-month (M/M) GGR numbers before they will change their bearish view on Macau.

According to the report, the anti-corruption campaign still scares many former Macau VIP gamblers, and they are unlikely to return until the heat dies down.

Finally, analysts believe there is downside risk to the table allocation expectations for new projects Galaxy Phase II and Melco Crown Entertainment Ltd (ADR) MPEL 4.59%‘s Studio City.

Analysts believe the Chinese government might not approve as many new table games for the resorts as anticipated.

Lowering GGR Growth Projections

Analysts slashed their 2015 Y/Y GGR growth estimates for the Macau market from -9.4 percent to -25.8 percent. They also cut their 2016 GGR growth projection from +26.0 percent to +10.6 percent.

Long-Term Value

Although they have a bearish near-term outlook, analysts still see value in Macau for long-term investors.

“We do not change our secular view that Macau and the oligopoly of companies that control the gaming market stand to benefit as more middle class consumers emerge from China and wish to visit the premier gaming destination in Asia,” analysts explain.

Stock Downgrades

CLSA issued the following three downgrades in the report:

• Las Vegas Sands Corp. LVS 3.75% downgraded from Buy to Outperform; price target $60
• Wynn Resorts, Limited WYNN 5.85% downgraded from Buy to Outperform; price target $140
• MGM Resorts international MGM 1.47% downgraded from Buy to Outperform; price target $25

Read this article and all my other articles for free on Benzinga by clicking here

Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!