Goldman Comments on Macau Gaming Trends; Adds Galaxy to CL-Buy, Upgrades Wynn Macau to Neutral (WYNN) (LVS)

July 5, 2012 2:52 PM EDT
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With mixed signals about recent trends in Macau, analysts at Goldman Sachs made an important call about the industry mid-day Thursday.

"Just as the market was overly optimistic when GGR surprised positively (up 27% yoy in 1Q), we think investors may now be too pessimistic about Macau's gaming market by extrapolating the weak May-Jun GGR trend to the rest of the year," the analyst comments.

They note VIP slowdown did not happen in the last two months and also said "rolling turnover actually fell from 56% yoy in 3Q11 to 11% yoy in Feb, as 40% correction in money velocity offset much of the impact from cage capital expansion." The believe recent signs of a property market recovery and easing concern over global macro meltdown should support VIP money velocity trend in the fourth quarter.

The firm replace Sands China, a unit of Las Vas Sands (NYSE: LVS), with Galaxy as CL-Buy, saying "the market may be disappointed by the slow SCC ramp-up and likely weak 2Q results for Sands."

The firm also upgraded upgrade Wynn Macau, a unit of Wynn (Nasdaq: WYNN), from Sell to Neutral. The firm said with its 35 percent underperformance over the past year, its valuation premium to Macau peers has narrowed to 16%, versus 37% historically.

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