In a new report, analysts at J.P. Morgan have trimmed their 2015 property-level revenue estimates for Macau based on the latest monthly gaming numbers. Despite the revision, analysts remain bullish on a pair of big casino names.
No Surprises
In the report, analysts point out that the market has likely already priced in downward revenue revisions for Macau.
“We don’t think these estimate revisions will come as a surprise to investors given the recent monthly detailed results for the Macau market,” analysts explain.
The Numbers
Analysts reduced their projections for 2015 property-level EBITDA in Macau by 12 percent to about $2.5 billion. The new estimate represents a 22 percent year-over-year (Y/Y) decline. Analysts’ new 1Q15 property-level EBITDA estimate is $640 million, down 32 percent Y/Y and down 10 percent Q/Q.
Outlook For Stocks
For the time being, analysts believe that volatility in Macau casino stocks, such as Las Vegas Sands Corp LVS 2.25%, MGM Resorts International MGM 0.23%, Wynn Resorts Ltd WYNN 0.76% and Melco Crown Entertainment Ltd MPEL 0.99%, will remain high.
Analysts predict that stability will return to the market when investors begin to get clarity on revenue numbers, impacts of new property openings, table game allocations and potential new government policies.
In the current environment, analysts see the risk/reward balance between dividend yield and downward estimate risk skewed “slightly more favorably” for long-term Macau investors.
Top Picks
Analysts maintain their Overweight rating on Las Vegas Sands based on its positioning in the Singapore and Macau markets, a strong balance sheet and expansion potential.
However, analysts name Overweight-rated MGM their “preferred way to play the LV/Macau operators at this time.”
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!
