Stifel: Macau Stocks To Outperform In FY15

Macau casino companies are oversold and will outperform the broader stock market in 2015, according to an analyst who said investor sentiment toward the group has hit a low point.

Stifel's Steven M. Wieczynski reiterated Buy ratings Thursday on MGM Resorts International (NYSE: MGM) with a $28 target and Las Vegas Sands Corp. (NYSE: LVS) with a $75 target.

"We do not believe there is harm in being early," according to Wieczynski, who forecast a 5 percent revenue decline for Macau gaming 2015.

A crackdown on corruption in China Macau's gaming revenue growth resulted in a 3 percent decline in Macau gross gaming revenue in 2014, versus 19 percent growth in the previous year, Wieczynski said.

"We're not predicting a v-shaped recovery," Wieczynski said. "But the longer-term upside opportunity far outweighs incremental downside potential."

MGM should lead the group's recovery with the scheduled opening of MGM Cotai in fall of 2016. The development will more than double MGM's Macau operation, even as it obtains relatively healthy revenue growth in Las Vegas, Wieczynski said.

Sands, which has the largest asset base among competitors in Macau, and stands to gain disproportionately from Macau's expected shift to a "total entertainment destination" and away from a pure gambling mecca, according to Wieczynski.