Short sellers target Macau casinos
27 March 2015 London
Image: Shutterstock
Short sellers have been taking advantage of the downturn in fortune of Macau鈥檚 casinos and overall slowdown of China鈥檚 economy, according to research from Markit.
In particular, the anti-graft campaign being carried out by Chinese president Xi Jinping, intended to eliminate corruption and ostentatious spending, is dramatically impacting the fortunes of Macau based casinos.
According to Markit, operators and their share prices are feeling the pinch as analysts have cut forecasts and recommendations on the majority of major players.
Short sellers鈥� current negative sentiment towards Macau casinos is best represented by the average proportion of free float out on loan. The current figure stands at 5.3 percent, substantially higher compared to the average of 2.4 percent for other Hong Kong listed gaming and leisure firms.
Dividend cuts are now forecast for the industry as a record 49 percent decline in monthly gross revenue was recorded in February 2015. Macau casinos have posted nine consecutive months of accelerating decreases in monthly gross gaming revenues.
Wynn Macau continues to be the most shorted casino with 9.9 percent of free float out on loan. The company鈥檚 share price has fallen by a third in just the last month as short sellers covered by 20 percent.
Markit Dividend Forecasting is expecting the company鈥檚 final dividend for the 2014 financial year to be revised down by a substantial 39 percent, although it did announce a special dividend in early March.
Analyst at Markit, Relte Schutte, said: 鈥淭his could explain the substantial movement in the company鈥檚 stock in the last month.鈥�
Markit have stated that Sjm and MGM China are expected to cut their interim dividends for fiscal 2015 by 27 percent and 32 percent, respectively, when they are announced in the summer.
Schuttte continued: 鈥淭his follows a second consecutive cut from MGM, having already reduced its 2014 final payment. Both names have seen a significant increase in short positions in the last few weeks.鈥�
Free float out on loan for Sjm has increased by 52 percent to reach 4% while the number for MGM China has increased by 33 percent to reach 4.6%.
Both of these significant increases in shorting activity have been accompanied by double digit share price declines.
Finally, Melco International has seen a significant sell off in recent weeks as the stock declined by 27 percent in the last month.
The company is expected to cut its final 2014 dividend by as much as 63 percent.
As a result, short sellers are holding their stations despite the recent share price collapse with the percent of free float out on loan holding at record highs of 8.6 percent.
In particular, the anti-graft campaign being carried out by Chinese president Xi Jinping, intended to eliminate corruption and ostentatious spending, is dramatically impacting the fortunes of Macau based casinos.
According to Markit, operators and their share prices are feeling the pinch as analysts have cut forecasts and recommendations on the majority of major players.
Short sellers鈥� current negative sentiment towards Macau casinos is best represented by the average proportion of free float out on loan. The current figure stands at 5.3 percent, substantially higher compared to the average of 2.4 percent for other Hong Kong listed gaming and leisure firms.
Dividend cuts are now forecast for the industry as a record 49 percent decline in monthly gross revenue was recorded in February 2015. Macau casinos have posted nine consecutive months of accelerating decreases in monthly gross gaming revenues.
Wynn Macau continues to be the most shorted casino with 9.9 percent of free float out on loan. The company鈥檚 share price has fallen by a third in just the last month as short sellers covered by 20 percent.
Markit Dividend Forecasting is expecting the company鈥檚 final dividend for the 2014 financial year to be revised down by a substantial 39 percent, although it did announce a special dividend in early March.
Analyst at Markit, Relte Schutte, said: 鈥淭his could explain the substantial movement in the company鈥檚 stock in the last month.鈥�
Markit have stated that Sjm and MGM China are expected to cut their interim dividends for fiscal 2015 by 27 percent and 32 percent, respectively, when they are announced in the summer.
Schuttte continued: 鈥淭his follows a second consecutive cut from MGM, having already reduced its 2014 final payment. Both names have seen a significant increase in short positions in the last few weeks.鈥�
Free float out on loan for Sjm has increased by 52 percent to reach 4% while the number for MGM China has increased by 33 percent to reach 4.6%.
Both of these significant increases in shorting activity have been accompanied by double digit share price declines.
Finally, Melco International has seen a significant sell off in recent weeks as the stock declined by 27 percent in the last month.
The company is expected to cut its final 2014 dividend by as much as 63 percent.
As a result, short sellers are holding their stations despite the recent share price collapse with the percent of free float out on loan holding at record highs of 8.6 percent.
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