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Howard Stutz

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Worries of avian flu outbreak in China have kept lid on Macau gaming stocks

9 Apr 2013

By Howard Stutz
One would think that after a record-setting gaming revenue month for Macau, share prices of the three Nevada casino operators doing business in the Chinese gaming enclave would skyrocket.

Guess again.

Shares of Wynn Resorts, Limited, Las Vegas Sands Corp. and MGM Resorts International saw little movement upward in the days following news that Macau’s gaming revenues reached an all-time single-month record of $3.92 billion in March.

All three companies rose in value Monday.

Concerns over a potential outbreak of a new strain of bird flu in mainland China worried investors and kept stock prices from rising, even as analysts touted Macau cracking gaming revenue records throughout the year.

Macau casinos collected $38 billion in gaming revenues in 2012 and figures are up 14.8 percent for the first three months of 2013.

Chinese officials said worries about the H7N9 strain are unfounded. Just a few cases have been discovered, none of which have been located in the Macau region.

Union Gaming Group Principal Grant Govertsen, who is based in Macau, said the cases of H7N9 are contained in the Yangtze River Delta provinces, which are relatively far away Macau.

“We believe it does not yet pose a threat to Macau’s public health and is not having any impact on visitation,” Govertsen said. “Macau’s coordinator for control and surveillance of communicable diseases stated that the virus currently represents a low risk to the city and the chief executive also commented that the city is well-prepared with accumulated experience in coping with infectious disease.”

Wall Street did its best to alleviate any concerns about a bird flu epidemic.

“There is no historical precedent to be selling Macau gaming names on this issue,” Deutsche Bank gaming analyst Carlo Santarelli told investors. “Given little to no evidence of avian flu impacting Macau gaming fundamentals or Macau gaming stocks, and our favorable view of the fundamental setup in the market at present, we see the recent pullback as a buying opportunity for both Wynn and Las Vegas Sands.”

JP Morgan gaming analyst Joe Greff said investors have also expressed concerns about the current tension between the U.S. and North Korea. But the worries should be minimal.

“Overall, we continue to like the Macau-centric stocks heading into the balance of 2013,” Greff said. “While the stocks have had a strong move since late last year, we still see attractive upside ahead.”

On Monday, shares of Las Vegas Sands rose $1.87 or 3.55 percent to close at $54.59 on the New York Stock Exchange. Shares of MGM closed at $12.36 on the New York Stock Exchange, up 37 cents or 3.09 percent.

Wynn Resorts shares ended Monday at $122.68, up $4.64 or 3.93 percent on the Nasdaq Global Select.

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