Harbor Research says Macau stocks are less risky than investors think
In a new report on Macau casino stocks released today, Seaport Research analyst Vitaly Umansky noted that the asset class remains a long-term growth story with less risk and less volatility than many investments as the author thinks.
Umansky, a veteran of sell-side coverage of casino gaming stocks, added that concerns among global market participants that China's economic weakness could have a negative impact on Macau's stock market are overblown. The Chinese economy is the second largest economy in the world.
While recent uncertainty is largely due to China's economic weakness and geopolitical concerns, China's economic weakness has not had a negative impact on Macau's recovery, and geopolitical concerns have been overemphasized," the analyst noted.
Umansky forecasts that Macau’s gross gaming revenue (GGR) will grow at a compound annual growth rate (CAGR) of 18% from 2023 to 2025, driven by strong contributions from mass market punters. Analysts estimate VW GGR will grow 19% over the period, while VIP sales growth will be more modest at 7%. Other analysts believe that the addition of more hotel rooms and gaming tables at integrated resorts in the Special Administrative Region (SAR) could lead to an increase in mass-market tourist numbers.
Galaxy gains market share, MGM China may give up some
Of the six Macau franchisees, Umansky expects Galaxy Entertainment to gain market share in the near term, while MGM Resorts International (NYSE: MGM ), which owns 56% of MGM China, may Some shares will be lost.
"Galaxy's key driver over the next one to two years will be capturing market share in the high-end gaming segment while growing as underlying quality recovers," he added. The analyst noted that the company will also benefit from the opening of Galaxy Macau's fourth phase, which will "significantly increase production capacity."
He acknowledged that while MGM China has recently gained impressive market share in Macau, those gains could be eroded as competitors bring new hotel rooms and other facilities to the market.
The analyst noted: “We forecast that MGM China will lose market share as other new hotels expand, attendance increases and other operators introduce smart table technology, in which MGM currently has a strong presence in the technology. Leading."
Still, he initiated coverage of MGM with a Buy rating and a $56 price target, which implies a 30.6% upside from today's closing price.
Melco Crown and Sands Group are Macau’s top picks
Umansky said that among other Macau stocks, Melco Crown Entertainment (NASDAQ: MLCO) is the best choice based on valuation and the best from a long-term risk-reward perspective The choice is for Sands China parent company Las Vegas Sands Corp. (NYSE: I object).
He noted that Sands China may lose some market share this year, “but by 2025, we expect [Sands China]’s GGR share to increase to 27%, compared with 24% in 2019, as Londoners fully optimizes and Get a foothold. “Quality recovery is accelerating. "
He rates Wynn Resorts (NASDAQ: WYNN ) at Neutral with no price target, noting that Wynn Macau could be hampered by a still-sluggish VIP business in Macau and a lack of products to appeal to mass-market customers.
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Source: www.casino.org
