The bulls are back as analyst ratings surge at record pace

Stock analysts are turning bullish on Macau casinos at a record pace, betting that the worst is over for investors as share prices rebound from the cheapest levels in three years.
Sands China Ltd., Galaxy Entertainment Group Ltd. and three of their smaller Hong Kong-
listed peers attracted at least eight rating upgrades this month as analysts pointed to a recovery in receipts from small-time gamblers, a bottom in industry earnings and better-than-estimated revenue during the Golden Week holiday. There’s also growing speculation that China will take steps to boost Macau’s economy, an “upside option” that Credit Suisse Group AG says is undervalued by the market.
A turnaround can’t come soon enough for shareholders who watched $110 billion of market value disappear amid the gambling hub’s worst-ever downturn. If the analysts are right, Macau casino stocks have another 8.2 percent upside after rallying 37 percent so far this month.
“There’s been a sudden re-assessment of the sector,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc. “Shares are probably headed for a short-term rebound, so it’s a good environment for analysts to slap on buy ratings.”
While there’s no historical precedent for such a surge in analyst optimism toward Macau casino shares, periods of improved sentiment in the Hong Kong stock market have been good times to invest. One-month returns following the five biggest share-price target upgrades in Hang Seng Index companies have averaged 1.4 percent since Bloomberg began compiling the data in 2004, versus a 0.6 percent gain for all months during the period.
The BI Macau China Gaming Market Competitive Peer Group Index surged 6.8 percent at the close in Hong Kong, its steepest gain since July 2. Galaxy reported its third-­quarter profit today, showing an increase of 13 percent from the previous three months. Its shares jumped 11 percent, while Sands China rose 10 percent.
The average consensus rating on the five casino stocks — including Wynn Macau Ltd., SJM Holdings Ltd. and MGM China Holdings Ltd. — has climbed to 3.77 on a scale where 5 signals unanimous buy ratings. That’s up from 3.2 just five months ago, the biggest increase since MGM China became the last to list shares in 2011. Bloomberg