Crikey

A new report from Morgan Stanley on the outlook for Macau, the Asian gambling centre in which James Packer’s PBL is pouring billions of dollars of investment into three casinos, offers a striking contrast to the puffery we have been reading from local investment analysts and financial journalists.

As Bloomberg reports:

Wynn Resorts Ltd. and Las Vegas Sands Corp., the US casino companies making the biggest bets in Macau, both fell more than 9 percent in U.S. trading after Morgan Stanley said September gaming revenue in the Chinese region was lower than estimated.

Preliminary revenue climbed a “disappointing” 55 percent from a year earlier, Celeste Mellet Brown, a Morgan Stanley analyst, said today in a research note. The firm had predicted a gain of about 75 percent.

“The gaming revenue number implies that the new supply that came to the market shifted revenue rather than grew the market incrementally,” wrote Mellet Brown, who rates both Wynn and Las Vegas Sands shares “equal weight.”

The opening of new resorts such as the Venetian Macao added about 30 percent more gambling tables, she said.

Wynn, founded by billionaire Steve Wynn, plunged $16.43, or 9.9 percent, to $149.40 at 4pm in Nasdaq Stock Market composite trading, the biggest drop in almost five years. Las Vegas Sands fell $17.03, or 12 percent, to $127.53 on the New York Stock Exchange, the largest decline in almost three years.

Wynn sold PBL Melco (the joint venture between PBL and Lawrence Ho’s Melco Developments) the sublease on a site for PBL Melco’s third casino in Macau. Revenues in the gambling centre have already been impacted by the Chinese Government slowing the number of people allowed to enter Macau from the mainland each day.

The first PBL Melco casino hasn’t had the best of openings, with work unfinished, staff untrained, poor location and poor revenues (except for high rollers).

The impact of the Morgan Stanley report on the PBL share price will be interesting today. PBL closed at $20.30 yesterday, up 74c. But today they were off 35c to $19.80 just after 11am.