Macau casino stocks tumble again as Deutsche Bank, others, trim forecasts

    Stocks in Macau casino operators fell sharply again Monday after analysts at Deutsche Bank and elsewhere cut their forecasts for gross gambling revenue growth for 2014.
    Deutsche Bank said that its forecast for 2014 has been cut to 12 percent from 15 percent, mainly because of the slowing China economy taking its toll on the VIP market.
    The German investment firm said it has cut its VIP revenue growth for this year to 3 percent from 7 percent, implying a 1 percent decline for the second half of the year.
    Some of the smaller junkets may face liquidity shortages over the next one to three months, leading to the change in estimates, the bank said.
    Deutsche Bank remains positive on the mass gaming market, with a forecast for 30 percent year-on-year growth. The 2015 forecast remains unchanged for a gain of 15 percent, helped by new openings, which have historically led to higher growth.
    The bank also downgraded its rating on SJM Holding and Wynn Resorts from buy to hold, while Sands China remains its top pick.
    In terms of investments, Deutsche Bank said the market is already pricing in most of the problems in the VIP market, but has not yet priced in any move to clampdown on Union Pay terminals, which would affect the mass sector.
    “If regulations on UnionPay change, e.g. fewer pawnshops are allowed, share prices may de-rate further,” it said.
    In May, GGR rose just 9.3 percent, coming in below the consensus forecast for low double-digit growth.
    In a separate report, Wells Fargo said the current macro environment in China remains mixed and may weigh on growth in Macau.
    “Specifically, property markets remain soft with surveyed new home price growth decelerating, likely driven by tighter credit and higher supply. We believe credit growth and a healthy housing market are important economic indicators in China, and a further slowdown could weigh on Macau,” analyst Cameron McKnight said.
    So far through to June 8, Wells Fargo said it estimates that June Macau gaming revenue growth is trending between 1-5 percent compared with its estimate for the month of 6.5 percent.
    Wells Fargo has lowered its forecast of annual growth in Macau this year to 11 percent from 13 percent.
    Sterne Agee said the run rate through to June 8th was up 5 percent year-over-year or MOP30.4 billion ($3.9 billion), including slot assumptions. Its June forecast ranges from a decline of 2 percent to a gain of 3 percent.
    Among stocks, Melco Crown was down nearly six percent in U.S. trading, Wynn Resorts
    was off almost 3 percent, Las Vegas Sands was down 2.2 percent and MGM Resorts fell 2.6 percent.