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Analyst sees positive signs in Macau

23 September 2009

LAS VEGAS, Nevada -- One Wall Street researcher believes Macau could be the catalyst to spur a prolonged upswing in the share prices of Las Vegas Sands Corp. and MGM Mirage.

JP Morgan gaming analyst Joe Greff said Macau has shown signs of recovering from its economic doldrums of the past 18 months. Mainland China has eased some travel restrictions, allowing for increased visitation while VIP commission caps have lowered casino operating expenses.

"China should remain one of the faster-growing countries in the next decade," Greff wrote in a note to investors Wednesday. "Macau will continue to benefit from the rapid expansion and increased affluence of the Chinese consumer."

Macau experienced a gross gaming revenue increase of 46 percent in 2007 and 52 percent in the first eight months of 2008. However, revenue growth began to slow in September 2008. Through June, monthly gaming revenue had dropped 9 percent.

However, Greff thought positive economic signs would be enough to push Macau gaming revenues up more than 14 percent in 2010.

"With the global economy continuing to recover, we expect the strong trends can continue," Greff said.

The news would be a boost for Las Vegas Sands and MGM Mirage.

Las Vegas Sands, which is planning for an initial public offering on the Hong Kong Stock Exchange, could resume construction on several of its stalled Cotai Strip resorts with the proceeds.

Greff thought the positive economic signs in China would be good news for the MGM Grand Macau, which could deliver "meaningful upside over the near and longer term" to the company.