Macau Stocks Get Mashed

Morgan Stanley says the region's September growth figures were below expectations.
By Nicholas Yulico ,

Updated from 10:26 a.m. EDT

The red-hot stocks of Macau casino operators cooled down Wednesday after an analyst said the market's growth numbers for September came in lower than she expected.

Morgan Stanley analyst Celeste Brown said preliminary Macau revenue for the month were up 55% from a year earlier, below her estimate for more than 70% growth. Macau, the only area of China where gambling is legal, has surpassed Las Vegas as the world's largest casino market.

Shares of the major casino owners in the market tumbled on the report.

Las Vegas Sands

(LVS) - Get Report

dropped 6.7% to $134.92,

Wynn Resorts

(WYNN) - Get Report

fell 7.7% to $153.15, and

Melco PBL

(MPEL)

dropped 5% to $17.99.

The stocks, which have been popular among momentum investors of late, were bound for a correction, says one hedge fund analyst who follows the sector. Each company's stock has risen sharply since Las Vegas Sands opened its Venetian Macau casino in late August to huge crowds.

While the stocks lost ground Wednesday, their long-term trend in coming years will be up, says one money manager who invests heavily in the space.

"This is a much-needed breather. Expectations got way up there too fast," says the investor, whose firm owns Las Vegas Sands and Melco PBL.

Earnings growth will continue to be strong, even if the stocks have hiccups from a month to month basis, due to concerns over revenue growth in the market, he notes.

The 55% growth for September is much better than people expected at the beginning of this year, he says.

As well, results in October could be particularly impressive, given that it is currently "National Golden Week" in China, a holiday period in the country that likely will create heightened period of travel to the region.

Jefferies & Co. analyst Larry Klatzkin also indicated that he wasn't particularly disappointed in the September numbers, if they are on target. Klatzkin said in a note to clients that he was looking for 61% September growth, so 55% would not be that bad a figure.

"I do want to note that the pre-

numbers that come out from the various brokerage firms are almost never right but do give a good indication," he added.

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