Macau growth to resume in 2016, Morgan Stanley says

Most of the concerns currently plaguing the Macau gaming industry are likely to disperse by 2015, though there is more uncertainty surrounding the impact of China’s anti-corruption drive on VIPs, according to a report by Morgan Stanley.
The U.S. bank studies five factors that are worrying investors and that have led to gaming stocks listed in Hong Kong to trail the benchmark Hang Seng Index by 30 percent this year.
Three main negatives for revenues over 2014 and 2015 were single-digit growth due to the smoking ban, VIP declines due to a junket liquidity crunch, and a fall in EBITDA of 20 percent in first quarter 2015 due to labor costs and a high base comparison.
The firm has cut its estimates for gross gambling revenue this year to growth of just 1 percent, with no growth in 2015, before rebounding 13 percent in 2016. The estimate is based on mass growth of 20 percent for 2014 and 11 percent and 24 percent in the next two years, while VIP is expected to fall 9 percent this year, 7 percent next and 4 percent in 2016. Without the addition of new capacity in Cotai, revenue would fall by 3 percent for the next two years, it said.
The bank cut its rating on Melco Crown Entertainment from overweight to equalweight with a $28 price target.
SJM Holdings Limited was also downgraded to underweight, with the operator expected to continue to surrender market share in the coming years.
But Wynn Macau was upgraded to equalweight.
Analysts expect a decline in Macau’s monthly gross-gaming revenues for September. Francis Tam Pak Yuen, Macau’s Secretary of Economy and Finance, has said gaming revenues for September were set to drop 12-13 percent, the worst decline since September 2008.