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Macau names at ‘attractive’ prices: Nomura

Jun 19, 2014 Newsdesk Latest News, Macau, Top of the deck  


Nomura says prices of shares in Macau casino operators are now “very attractive”, following sharp drops in recent weeks.

“At current levels, we see downside risk of flat to down 4 percent, which is very attractive against potential upside of 30 percent to 40 percent,” the Japanese brokerage firm said in a note issued on Wednesday.

Kelvin Wong, senior Hong Kong and China equity analyst at Bank Julius Baer & Co, told Bloomberg on Tuesday he foresees that Hong Kong’s Hang Seng Index will go up by as much as 10 percent by year-end, fuelled by a reversal in the price pullback of stocks in Macau casino operators. All six Macau casino operators are listed in the Hong Kong Stock Exchange.

“While we recognise the lack of positive catalysts over the next two to three months could leave many investors on the sidelines, for an investor with a longer-term horizon, we recommend accumulating buy-rated Sands China Ltd, MGM China Holdings Ltd or Wynn Macau Ltd on pullbacks,” Nomura’s analysts Louise Cheung and Harry Curtis wrote.

The two analysts said that for investor sentiment to improve, Macau casinos must first post “consistent weekly gross gaming revenue [GGR] improvement and continued strong mass results”. But they warned that mass comparisons get tough starting in August, at which point mass-market GGR growth should decelerate below the current 30 percent run rate.

“Concerns over UnionPay and October 6 mass smoking ban remain sentiment headwinds for the mass segment,” they added. “However, as we had written previously, we expect the continued crackdown of China-registered devices and the anticipated July 1 removal of UnionPay machines of the gaming floor to have limited impact on GGR as we understand UnionPay machines in the retail areas and outside casinos are not impacted and will continue to operate as usual.”

Given the disappointing second-quarter VIP trends for Macau, Nomura lowered its full-year 2014 forecast for the overall market from a growth rate of 16 percent to 10 percent. For 2015, it now foresees growth of 12 percent against a prior estimate of 15 percent.


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