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Sell, Buy, Hold: Busy Times for Top Macau Casino Analyst

Updated on
  • Daiwa's Soo changes stock's rating three times in two months
  • Changes come as Macau casino stocks face higher volatility

Sands China Ltd.’s top stock prognosticator has been changing his mind a lot lately.

Daiwa Securities Group Inc.’s Jamie Soo has switched his investment ratings on Sands China three times in the past two months, going from a hold to a sell, then upgrading to a recommendation equivalent to a buy before returning to a hold. Soo’s worth watching as his calls on Macau casinos over the past year have delivered the best returns among analysts tracked by Bloomberg.

Soo’s frequent flip flops help illustrate how casinos -- a group of stocks already known for their high daily swings -- are getting even more volatile lately. The 30-day volatility measure in Bloomberg Industry’s Macau Gaming index is at its highest level in almost four years.

Though share prices have been exceptionally volatile as of late, the overarching theme in Macau during the past couple of years has been pretty steady. The world’s biggest gambling hub is weathering through its worst-ever downturn with gaming revenue slumping for 16 straight months and the economy shrinking more than 20 percent for two consecutive quarters.

Battered by China’s anti-graft campaign and slowing economic growth, Macau’s struggles have made analysts such as Soo stand out for his bearish views over much of the past year. Last month, he upgraded some casino stocks, including Sands China, as valuations plunged to the lowest levels since 2012.

Dividend Concerns

Soo’s optimism for Sands China lasted about a month as he cut the stock’s rating to hold, citing concerns about the casino operator’s ability to maintain its dividend payment levels, though he kept the target price unchanged at HK$28.17. Sands didn’t respond to queries about the analyst’s concerns and Soo declined to comment beyond what he wrote in his latest report.

Sands China, controlled by billionaire Sheldon Adelson, saw third-quarter profit fell 33 percent, missing analysts’ estimates, as competition for tourists intensified in the Cotai Strip area, the parent company Las Vegas Sands Corp. said in a statement Wednesday.

Adelson is preparing to open Sand’s Parisian Macao casino in late 2016 during a difficult time for operators, as they’re held in suspense while waiting to be told by authorities how many gambling tables their new projects will be allowed to have.

Las Vegas tycoon Steve Wynn lambasted Macau last week for the delays, prompting the government to fire back demanding operators comply with its rules, while Melco Crown Entertainment Ltd. announced Tuesday it will receive 250 gaming tables for the $3.2 billion Studio City resort, only a week before it’s due to open.

(Updates with Sands China results in seventh paragraph.)
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