US-based investment bank Brean Capital has adopted a contrarian position to the majority of gaming investors and advised its clients to buy stocks of the four major casinos in Macau as it anticipates a nice surprise in the second half of the year. After losing almost 50 per cent of its value since last year’s peak, gaming shares continue to suffer several headwinds, as revenues show no sign of recovery with investors predicting a 20 per cent drop in 2015. Some even have misgivings about the anticipated success of the new Cotai properties. Despite the gloomy outlook, however, others want to take a chance on the cheap stocks. Take Brean Capital, for example. The investment bank said last week that it is confident that the second half of the year will deliver in terms of revenues as the opening of Galaxy Phase II and Melco Crown’s Studio City will together provide Macau with 5,200 extra hotel rooms and likely be the main drivers of industry performance this year. In the long term, the infrastructure package of the city like the Hong Kong-Zhuhai-Macau Bridge, the Light Rail Transit system and the Taipa Ferry Terminal, will support the expansion of Cotai gaming properties. With this in mind, Brean Capital decided to advise its clients to buy stocks from the four major casinos operators that have operations here (Melco Crown, MGM Resorts, Wynn and Las Vegas Sands). This contrasts with the majority of analysts (Deutsche Bank, Morgan Stanley or Wells Fargo) that recently revised down their outlook for Macau and advised selling some of the operators’ stock. Brean Capital says Melco Crown profits are likely to increase in the future after the opening of Studio City: ‘We would take advantage of recent weakness in the shares to build positions’. Las Vegas Sands is described as the ‘best-positioned gaming company’ with a strong position in Macau and its presence in the growing Singapore market. MGM Cotai will boost MGM’s earnings, with the same happening with Wynn and its Wynn Palace.
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