Melco drops as Morgan Stanley lowers to hold on gaming outlook

Melco Crown Entertainment Ltd. fell for the first time in three days in New York as Morgan Stanley cut the Macau casino operator to hold, saying revenue will probably keep dropping in the gambling enclave.
Gambling in Macau has slumped as high rollers, who account for about two-thirds of revenue, were dissuaded from playing there amid concern President Xi Jinping’s anti-graft campaign will attract scrutiny and after the government tightened visa rules. Chinese consumers also cut spending as the economy expands at the slowest pace in 24 years. Morgan Stanley reduced Melco Crown from the equivalent of buy, projecting a 25 percent drop in gaming sales in Macau this year.
“The primary drivers have been the government crackdown and tighter credit,” Matthew Jacob, a director at ITG Investment Research in New York, said by phone. “Trends aren’t getting any better. The rhetoric we have seen is that the government will get even more strict.”
Traffic into Macau may dwindle further as the government said in January it intends to impose a full smoking ban on all areas at casinos. A VIP-room smoking ban this year would further weaken gaming profits in Macau, Jacob said. Private high-roller rooms are currently exempted from a smoking ban already implemented in other casino areas.
Melco Crown, controlled by Lawrence Ho and Australian billionaire James Packer, has declined 17 percent this year in New York, compared with a 0.1 percent drop in the Bloomberg index of the most-actively traded Chinese companies in the U.S. Stephen Stapczynski and Belinda Cao, MDT/Bloomberg