Casino companies with significant exposure to China initially got a nice boost this morning after China announced that it was cutting interest rates. More recently the stocks are mixed.
More liquidity in the economy can only help the casinos, and “loan growth in China in particular should be a driver of the group,” wrote Nomura Research analyst Harry Curtis in a note today.
Curtis sees the big casino stocks rising an average of 40% in the next year. One reason for the expected gain is that gaming stocks are no longer outperforming the market as much as they were earlier in thee year. In the past month, Las Vegas Sands (LVS), MGM Resorts (MGM), and Wynn Resorts (WYNN) are all underperforming the broader market.
“Since the stocks have given up most of their YTD outperformance, in our view, they more than discount all but a hard landing in China, which we view as less likely.”
That said, revenue growth in Macau is undoubtedly slowing, and Curtis trimmed his estimates — 2012 growth will likely be 15%, down from prior expectations for 19%. And 2013 growth will slip to 11%, from prior expectations for 16%.
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