Bank of America Merrill Lynch issues a positive note on the Macau sector. The stabilization of the mass market in the region is seen by BAML as a positive due to the higher operating margin delivered from the segment. “We expect that the switch is likely to continue in 2H. We estimate that VIP will account for less than 15% of EBITDA in 2H,” writes analyst Billy Ng. BAML upgrades MGM China and Melco Crown International (NASDAQ:MPEL) to BuyThe biggest news out of the Macau sector today is the grand opening of the Wynn Palace (1,700 rooms) in Cotai. Macau casino stocks: Moncler Outlet Online Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY, WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF, LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY, MG), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF, OTCPK:SJMHY).
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The Macau casino sector is riding high after Las Vegas Sands (LVS +4.7%) pointed to a “stabilization” trend in the mass market segment. The focus by investors is starting to pivot to new projects with Wynn Palance (August 22) and Sands Parisian (September 13) openings around the corner. Though extra traffic and non gaming sales are anticipated, there could also be some pricing pressure for room rates. Analyst note that the revenue comparisons will start to ease for companies in Q3 just as the new properties come on line. Telsey estimates year over year growth of 8% after ten days of the month, inclusive of electronic gaming revenue. Other firms are less optimistic after adjusting for the extra weekend (Nomura) and dissecting the entire month (Wells Fargo). Notable gainers on the day include Melco Crown (MPEL +5.3%), Las Vegas Sands (LVS +4.3%), MGM Resorts (MGM +0.4%), and Wynn Resorts (WYNN +5.3%).
An exceptionally soft week in Macau has some analysts scrambling to reset expectations for the full month. Average daily gaming revenue fell 22% W/W to 432M HKD ($55.68M) with the distraction of the Euro 2016 soccer tournament and a low VIP win rate cited as factors. Nomura notes that June revenue could slide to a 5 year low if current trends hold. Macau casino stocks: Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY, WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF, LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY, MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF, OTCPK:SJMHY), Melco Crown (NASDAQ:MPEL).
The buzz out of Macau is that gaming revenue is trending positive after the first 12 days of June. Telsey Advisory Group estimates 5% Y/Y growth, although the analyst team says a high hold percentage could be behind the bump. Sterne Agree confirms the strong start, but notes that the shift of the Dragon Boat Festival to earlier in the month and the potential impact of the Euro soccer tournament need to be considered. Wells Fargo adjusts its forecast for June revenue growth in Macau to 4% to 7% vs. 10% in May after factoring in the early numbers. Macau casino stocks: Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY, WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF, LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY, MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHF, OTCPK:SJMHY), Melco Crown (NASDAQ:MPEL).