Macau casino stocks have further to fall

Stock prices for Macau’s casino operator have not bottomed out and have further to fall yet, investment bank Morgan Stanley says in a commentary after a recent visit to the area.
Morgan Stanley says Macau’s “valuation is not compelling” after falls by Las Vegas Sands (LVS) down 1.7 percent. Melco Crown (MPEL) 2.4 percent. MGM Resorts (MGM) 2.4 percent. Wynn Resorts 1 percent, Morgan Stanley analyst Praveen Choudhary says the consensus of analysts’ estimates is still too high.
“Consensus estimates are still expecting 9 percent revenue and 13 percent EBITDA growth in 2014, which we think is too high. Forward P/E and EV/EBITDA of 11.5x and 14.7x could go higher following potential revisions and thus are not attractive.
He also points to a looming labor shortage as “each Cotai Phase 2 casino may need between 6,000 to 8,000 employees. Recent strikes and labor cost inflation have added more margin pressure on top of falling revenues.
Staff bonuses have for the first time reached a 14th month, above the typical 13th month paid in other industries in Macau. Some companies also expect base wage growth to track above CPI of 6 percent, higher than the 5 percent per annum increase in the last few years.