Analyst Comments on China Crackdown in Macau (LVS) (MGM) (WYNN) (MPEL)

Gaming stock declined pre-market on Thursday after the South China Moring Post reported that China is cracking down on cash-card capital flight to Macau. Affected stocks include Las Vegas Sands (NYSE: LVS), MGM Resorts International (NYSE: MGM), Wynn Resorts Ltd (NASDAQ: WYNN) and Melco Crown Entertainment Limited (NASDAQ: MPEL).

Analyst Carlo Santarelli of Deutsche Bank commented on developments.

"Tonight, post market close, the South China Morning Post reported that the mainland intends to begin cracking down on the use of UnionPay cards in Macau. While the article provides little detail as to how state-backed UnionPay intends to do so, one can imagine more restrictions on the amount of money one can withdraw from their Unionpay debit card is likely. Recall, similar measures were previously taken in the past to curb Unionpay transaction size," said Santarelli.

"It is widely believed that Unionpay has been a healthy contributor to the mass segment, specifically the fastest growing mass segment, the premium mass business, thus the news likely comes as a surprise to those who viewed the mass business as largely defensible against other macro type potential system shocks. The article speaks to roughly $6.45 bn of 2013 GGR (14.4%) stemming from Unionpay sourced funds," he added.

"While the ultimate impact, in the event a true crackdown does ensue, is extremely difficult to numerically quantify, we presume the impact to stocks, given the recurrence of mainland crackdown headlines such as this, is likely to be more punitive than the ultimate financial impact. We also think it is important to keep in mind that a move that potentially curbs premium mass capital sourcing, likely re-cements junket positioning within the market as former low end VIP players would likely migrate back to their capital providing junkets. Thus, it is entirely possible that the revenue hit could be muted as VIP accelerates and mass slows, but the EBITDA mix would undoubtedly be negatively skewed in this circumstance. Net-net, at this stage it is merely a headline and while it is difficult to expect the stocks will not overreact to these headlines, we do believe fundamental trends remain healthy at present," he said.

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 $77.75 yesterday.

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