Barron’s sees Macau decline

Nov 27, 2007 5:56 AM

All it took was a negative article titled, "Fold ”˜Em" in Barron’s to cause the share price of Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. (LVS) to plunge nearly 7 percent.

The article, written by Kopin Tan, immediately drew fire when Larry Klatzkin, a highly-respected gaming analyst with Jefferies & Co., claimed he had been misquoted in the article.

Essentially, the article suggested the stability of major growth in Macau could be at risk what with continued development of new casinos, the fact that the Chinese government might tweak regulations to discourage attendance and that a labor shortage alone could crimp growth.

Klatzkin released a note saying the author "misquoted us on Wynn, which we continue to rate as a ”˜hold’ and view as having long-term value driven by its development pipeline." He added that the Macau gaming market remained strong and he foresaw the market size growing to more than $15 billion by 2010.

Wynn Resorts responded to the article by announcing that its board of directors had approved a $6 dividend to be paid on Dec. 10 to shareholders of record on Nov. 30.

In response, investors pushed the value of WYNN shares up by 6.2%.

And Klatzkin again got into the act by upgrading his view of the WYNN shares to "buy" from the previous "hold." He also kept his price target at $152 per share.

"Recent declines in the price of Wynn stock reflect investor concerns as to the strength of the Macau gaming market," he wrote. "We continue to see Macau’s gaming market to be strong and forecast it to be on track" to reach the previously estimate of $15 billion by 2010.

Another analyst, Celeste Brown of Morgan Stanley, added that she felt the company would have "ample cash balances" of around $1.3 billion after paying the dividend.