Bullish On Macau Stocks? Sterne Agee Is, Despite A Difficult February

In a recent report, analysts at Sterne Agee updated their outlook for Macau gaming stocks. While they lowered their gaming revenue expectations for the month of February based on month-to-date numbers, analysts note that February should be the lowest-growth month of 2015 for Macau.

The Numbers

Sterne Agee’s mid-month channel checks indicate that Macau is on pace for a 54 percent year-over-year drop in gross gaming revenue (GGR) for the month of February.

GGR numbers typically fall off in the weeks leading up to big holidays such as the upcoming Chinese New Year and then pick up during the holiday.

Last year, the Chinese New Year began on January 31, and this year it begins on February 19.

Related Link: Has Macau Finally Hit Rock Bottom?

Tough Comps

February was the peak month for GGR in 2014, so year-over-year comparisons for the month will likely be very bad.

In 2014, February GGR was 30 percent higher than the average for the year, growing 52 percent compared to February 2013.

Forecast

Analysts have lowered their projected February 2015 GGR growth rate prediction from -39 percent to -46 percent based on the most recent numbers. The report notes that Las Vegas Sands Corp LVS and Wynn Resorts Ltd WYNN are both expected to gain market share in the month.

Analysts see Las Vegas Sands as the biggest beneficiary of the influx of Chinese New Year traffic to Macau, and they believe that Wynn will benefit from recently-completed remodeling projects.

Stock Picks

Sterne Agee analysts believe the worst part of the storm is in the rear view mirror for Macau stocks.

They have a Buy rating on the stocks of Las Vegas Sands, Wynn, MGM Resorts International MGM and Melco Crown Entertainment Ltd (ADR) MPEL.

Disclosure: the author owns shares of Melco Crown Entertainment.