Wynn Macau, Sands China Plummet, Leading Casino Stocks Lower
Wynn Macau retreated 17 percent, the most since listing two years ago, to HK$18.78 while Sands China plunged 14 percent to HK$18.64. Rivals Galaxy Entertainment Group Ltd. (27), MGM China Holdings Ltd., SJM Holdings Ltd. (880) and Melco International Development Ltd. (200) also declined.
A Bloomberg poll showed investors expect growth to slow in China. Wealthy gamblers from mainland China have underpinned Macau’s growth, the only place in the country where casinos are legal. Casino gambling revenue in the former Portuguese colony last year was four times that of the Las Vegas Strip and has grown 47 percent in the eight months through August to 173 billion patacas ($22 billion).
“China’s economy may be slowing down,” Teng Yee Tan, an analyst at CIMB Securities HK Ltd., said in a phone interview today. “People are speculating that some junket operators are facing a liquidity squeeze.”
Junket operators are paid a commission by casino operators for bringing customers to place gamble at high-stakes tables, where bets go up to as much as $250,000 a hand. They also extend loans to their clients and collect on the debts.
Purchasing Managers’ Index
“Renewed fears for the potential of slowing growth in China” contributed to the decline in the share prices of Las Vegas Sands Corp. (LVS) and Wynn Resorts Ltd. yesterday, David Bain, an analyst at Sterne, Agee & Leach, wrote in a note to clients.
Fifty-nine percent of respondents to the Bloomberg survey said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders, who are Bloomberg subscribers, showed.
The China purchasing managers’ index, a gauge for manufacturing, released by HSBC Holdings Plc and Markit Economics today showed a reading of 49.9 for September, the third monthly contraction, as measures of new orders and export demand declined. The data adds to evidence that growth in China is moderating after the government imposed curbs on lending and the real-estate industry to damp inflation.
Las Vegas Sands fell 5.3 percent to $41.33 in New York trading yesterday while Wynn Resorts Ltd. (WYNN) plunged 7.3 percent to $125.54 in Nasdaq trading.
“Today’s underperformance is a good buying opportunity for Macau names,” said Bain. Macau gambling revenue for the third quarter will probably be higher than estimated, he said.
Junket operators “sound a bit more conservative in terms of credit extension, but none of them have seen issues regarding securing working capital nor credit collections” from high- stakes gamblers, Gabriel Chan and Isis Wong, analysts for Credit Suisse Group AG in Hong Kong, said in a Sept. 27 note to clients.
Galaxy slid 13 percent to HK$11.62 in Hong Kong trading, Melco International dropped 13 percent to HK$5.23, MGM China tumbled 12 percent to HK$10.32, and SJM fell 8.7 percent to HK$14.10.
Hong Kong markets were closed yesterday because of Typhoon Nesat.
Macau’s September casino gambling revenue will probably grow as much as 46 percent, and October “could yield a new monthly gross gaming revenue record,” Bain wrote.
China celebrates National Day with a week-long holiday next week. The so-called Golden Week is “a large driver of Macau revenue,” Bain wrote.
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