Macau Casino Woes Prompt Deutsche Downgrades, Target Cuts

Slowing demand from gamblers in Macau and and intensifying competition for their yuan lead Deutsche Bank to downgrade leading players in the sector Friday while slashing targets across the board. Deutsche's Karen Tang also cited rising labor costs and longer times for approval required for new facilities. Tang downgraded the Macau unit of Wynn Resorts Ltd. WYNN to Sell from Hold and moved her rating on the China Sands unit of Las Vegas Sands Corp. LVS to Hold from Buy. Both units trade on the Hong Kong stock exchange. Wynn Macau fell 3.3 percent Friday morning; China Sands lost 0.4 percent. Macau, the world's largest gambling center, is the only place in China where casinos are legal and revenues have declined lately in the face of that country's economic slowdown as well as a crackdown on corruption that has so far resulted in the reported arrest of more than 60,000. As if to add insult to injury, local authorities will impose a smoking ban starting Oct 6 on Macau's mass-market gaming floors. High-end private VIP gaming rooms are exempt, but China's smoking rate is nearly 70 percent higher than the U.S. In addition, Tang made the following target cuts: Galaxy Entertainment Group Ltd. GXYEY $61.50 from $80; Melco Crown Entertainment Ltd. MPEL $29.03 from $41; MGM China Holdings MCHVY $27 from $32 and SJM Holdings SJMHF $20.05 from $21.50.