Macau VIP Growth Could Meaningfully Decelerate Over Next 6 Months (LVS) (MGM) (WYNN) (MPEL)

Gaming stocks Las Vegas Sands (NYSE: LVS), MGM Resorts International (NYSE: MGM), and Wynn Resorts Ltd (NASDAQ: WYNN) and Melco Crown Entertainment Limited (NASDAQ: MPEL) declined Tuesday after China credit statistics were released. Growth was down 9% suggesting VIP revenue will continue to decelerate, according to analyst Cameron McKnight of Wells Fargo.

"Credit growth is a strong leading indicator of VIP results, in our view, and was down 9% yr/yr in Q1. We believe a 6­12 month lag exists between trailing-­twelve-­month (TTM) total Chinese credit growth and Macau VIP results. TTM credit growth as of March was down 7.5% and was the softest result since May 2012. Given the observed relationship (60% correlation) between credit growth and VIP gaming, we expect VIP growth to continue to decelerate," said McKnight.

"Given credit trends, we believe VIP growth is likely to continue to decelerate. We recently adjusted our estimates, expecting only 3% VIP growth in H2 2014 vs. 12.5% growth in Q1 2014. We believe a deceleration of this degree is just beginning to be factored into expectations following weak April trends, and investor awareness of the relationship between credit/VIP growth is increasing," he added.

For an analyst ratings summary and ratings history on Las Vegas Sands click here. For more ratings news on Las Vegas Sands click here.

Shares of Las Vegas Sands closed at $74.66 yesterday.

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