Nomura Securities Downgrades Las Vegas Sands (LVS), Wynn Resorts (WYNN) to Neutral; MGM (MGM) Maintained at Buy

Nomura Securities analyst Harry C. Curtis downgraded Las Vegas Sands (NYSE: LVS) and Wynn Resorts Ltd (NASDAQ: WYNN) from Buy to Neutral with a price targets of $54 ($70.00) and $149 (from $209), respectively. Meanwhile the firm maintained a Buy rating on MGM (NYSE: MGM) but cut its price target to $24 (from $30). The firm is lowering Macau GGR forecasts, EBITDA estimates, and projected ROIC’s on new Cotai projects significantly.

The firm is reducing Macau GGR Forecast to (19.6%), well below the Street at (8%). "There is a new sheriff in Macau and that sheriff is Beijing, which is tightening and enforcing travel and capital flow regulations that either didn’t exist or were ignored nine months ago. We believe the current level of demand may average ~ 775m MOP/day through 2015. (8%), which we were early in lowering to, implies daily GGR of 894m MOP and now looks hopelessly optimistic. Our estimate does not assume new policies restricting either the use of Unionpay cards, the business practices of the jewelry shops in Macau, or a full ban on smoking in the casinos. Investors may view our new estimate as too conservative, but the chance of current trends improving in the face of even more regulation/enforcement seems remote."

Curtis added, "With Beijing’s insistence on diversifying Macau’s revenues from gaming, we assume 40%-50% lower table allocations for the new resorts (200-300). EBITDA/table, however, should be at or above current levels since supply growth is likely to be well below demand growth in 2016-2017. We ascribe little incremental EBITDA for non-casino amenities. Three months ago, we lowered our ROIC forecast from 30%-35% to ~25%. With fewer tables and lower-than-expected GGR going into the openings, a 15% ROIC is more likely."

If daily GGR averages 775m MOP, then 2015 EBITDA estimates in Macau decline by 15%-20% for WYNN, LVS and MGM. Parent company estimates decline by 15%, 11% and 5%, respectively, which is now the differential between their estimates and consensus.

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 $53.20 yesterday.

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