'Macau's At A Crossroads' According To Susquehanna; Price Targets Reduced

In a report published Friday, Susquehanna Financial Group analyst Rachel Rothman described Macau's gaming market as being at a crossroad given rumors of a complete smoking ban, table count concerns, additional supply coming and gaming revenue declines. Rothman noted that after a year of "disappointing" headlines, shares of Las Vegas Sands Corp. LVS, MGM Resorts International MGM and Wynn Resorts, Limited WYNN are down 28 percent, 20 percent and 48 percent, respectively. Rotham continued that June marks the first month of negative prior year gaming revenue growth comparisons with some investors holding optimistic views that improving one year headlines could signal an "inflection" in the stocks. The analyst pointed out that the counterpoint is that Galaxy's May 2015 opening on Cotai, Melco Crown Entertainment Ltd MPEL's planned third quarter opening, and a number of 2016 Cotai openings may not grow the market enough to offset the capacity increase. Investor confidence was further boosted after shares of Macau related gaming companies rallied last week on signs that visitation and gross gaming revenue trends were beginning to show improvements. However, the Rothman pointed out that shares reversed most of these gains following rumors of a complete smoking ban and junket layoffs. "We continue to believe that Macau will eventually turn, but we remain cautious in the near term given the small sample size, the potential for a full smoking ban, and no signs of a significant easing in the anti-corruption campaign," Rothman concluded. "We encourage investors interested in Macau to focus on LVS and MGM given greater downside protection." Shares of Las Vegas Sands were reiterated with a Positive rating with a price target lowered to $63 from a previous $64. Shares of MGM Resorts were reiterated with a Positive rating with a price target lowered to $24 from a previous $25. Shares of Wynn Resorts were reiterated with a Neutral rating with a price target lowered to $103 from a previous $115.