Nomura Talks Macau, Still Doesn't Like Melco Crown

In a report published Thursday, Nomura analyst Harry Curtis suggested that investors should avoid investing in casino operators with exposure to the Macau market.

According to Curtis, Macau market estimates are beginning to reflect the reality of daily gross gaming revenue of 600 million to 700 million MOP ($75.16 million to $87.69 million). As such, value investors are exploring the possibility that it is "safe to go back in the water."

Curtis offered six reasons why investors should remain on the sidelines.

• Demand growth is likely to lag supply growth through 2016.
• Hotel occupancy and pricing are declining ahead of a 35 percent increase in capacity.
• Rooms and tables are being filled with "lower quality" customers.
• Smaller gaming and hotel budgets translates to lower margins for the company.
• Visitation cannot match capacity growth until improvements are made to the existing infrastructure.
• The stocks aren't cheap.

Analyst Ratings And Stock Reactions

Curtis maintained a Neutral rating on Wynn Resorts, Limited (NASDAQ: WYNN) and Las Vegas Sands Corp. (NYSE: LVS). At the same time, the analyst maintained a Reduce rating on Melco Crown Entertainment Ltd (NASDAQ: MPEL).

Curtis said the three stocks are trading at EBITDA multiples ranging from 11x to 15x his estimates, which are "not compelling."

Shares of the three names were trading mostly lower on Thursday morning and continue flirting with their 52-week lows.

Shares of Wynn Resorts were lower by 0.60 percent on the day at $110.31, just above its 52-week lows of $108.27. Shares of Las Vegas Sands were unchanged at $52.04 and continue to hover above its 52-week low of $49.82.

Shares of Melco Crown hit new 52-week lows of $18.75 and were last trading at $18.99, down 0.11 percent on the day.