Casino operators climb on latest Macau figures

Jan 5, 2010 10:07 PM

 

Shares of casino operators traded mostly higher Tuesday — led by those with properties in Macau — as investors remained upbeat about the latest gaming revenue figures for the Chinese enclave. The likely passage of a Pennsylvania gaming bill provided an additional boost.

Reports indicating that Macau gaming revenue increased 48 percent in December buoyed shares of Las Vegas Sands Corp. (LVS), MGM MIRAGE (MGM) and Wynn Resorts Ltd. (WYNN) on Monday, when the data first came out. All three companies have properties on the enclave, the only place in China where gambling is legal.

The news was still giving a lift to the stocks on Tuesday, as the industry tries to gauge if casino companies are beginning to recover from struggles they endured during the economic downturn. Gaming revenue has steadily improved in Macau since last summer, but U.S. results remain sluggish and worries about new supply coming online remain.

Shares of MGM MIRAGE gained 62 cents, or 6.4 percent, to $10.35 in afternoon trading. The stock has traded in a 52-week range of $1.81 to $16.89. Wynn's stock rose $3.73, or 5.8 percent, to $67.69. The shares have traded between $14.50 and $74.90 over the past year.

Others in the sector were also up, with Macau casino operator Melco Crown Entertainment Ltd. (MPEL) surging 55 cents, or 15.4 percent, to $4.14.

The market has also set its sights on Pennsylvania, where a table games bill is expected to pass within the next day or two. The bill would allow table games to be used by casino operators in the state who currently only run slot machines. The table games would initially be taxed at 14 percent, according to a client note by Susquehanna Financial Group's Robert LaFleur, with the tax rate declining to 12 percent next year.

The bill's passage would benefit both Penn National Gaming Inc. (PENN) and the Sheldon Adelson-led Las Vegas Sands.

"Las Vegas Sands' Bethlehem property is about an hour closer than Atlantic City to the North New Jersey/New York City area, so the addition of table games could draw additional visitation from this area," LaFleur wrote.

Shares of Penn National Gaming added 24 cents to $27.99, while Las Vegas Sands' stock gained $1.31, or 7.9 percent, to $17.93.

Felicia Hendrix of Barclays Capital started coverage of Las Vegas Sands Tuesday with an "Overweight" rating and $24 price target, saying the casino operator has one of the most attractive development pipelines among the companies she covers.

"We believe the market is undervaluing the company's opportunities in Singapore and Macau, presenting investors with a buying opportunity," she said.

On Monday Goldman Sachs' Steven Kent reinstated coverage for Las Vegas Sands with a "Neutral" rating and a $16.25 price target.