Can Las Vegas Sands Rebound from a Slim Cash Flow in China?


The world’s largest casino company, Las Vegas Sands (NYSE:LVS), fell to its 2013 low as investors grew concerned that a cash shortage in China would slow economic growth.

With concerns over its properties in Macau and Singapore, Sands fell as far as 8.3 percent Monday. Other companies with properties in Macau saw sharp declines as well; Wynn Resorts (NASDAQ:WYNN) fell as much as 5.8 percent and Melco Crown Entertainment (NASDAQ:MPEL) dropped as far as 7.3 percent, according to Bloomberg.

Yesterday the People’s Bank of China signaled no relief from policy makers for a cash squeeze that doubled the money-market rate over the past month, essentially starting today’s free fall. The CSI 300 Index of Chinese stocks trading in Shanghai and Shenzen dropped more than 20 percent from this year’s high set in February.

“People are capitulating and tossing out the towel,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages $700 million in assets, said in a telephone interview. “The government wants to change the excess credit model where liquidity will be much more controlled. Clearly, the economy will slow down.”

As a result of the Chinese government’s decision not to send relief for the cash squeeze, many casino stocks saw a large portion of their gains in 2013 evaporate. By mid-day Monday, Wynn dropped to $122.11, almost having its year-to-date gain. MGM Resorts (NYSE:MGM) sank 5.3 percent, losing one-third of its 2013 gains.

The reason the Sands casino in Singapore took a tumble is because of poor air quality, according to Bill Lerner, an analyst at Union Gaming Group LLC. Lerner lowered his estimate for revenue from Marina Bay Sands by 4 percent, saying that revenue for a week will be about half of normal levels.

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