Macau casino stocks worth revisiting after fall, analysts say
Macau casino stocks have been falling since early August amid worries about a recession in China and recent short-term closures of gaming venues due to typhoons. But at least one analyst believes the share price has reached a level that warrants another look at the group.
Stifel analyst Steven Wieczynski said in a new client note that macro concerns about China's economy - the world's second-largest after the United States - are now priced into the share prices of Macau operators, suggesting that Valuation opportunities may arise.
Pent-up demand remains strong, and we believe the upcoming Golden Week holidays (end-September to early-October) will bear this out,” the analyst noted. “Valuations remain too compelling, with Macau-centric stocks trading at The discount is more than 25% compared to the normal trading range. "
Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are two of three U.S. franchises in Macau that have been in the red since last month state. Last month, Sands Group’s share price fell more than 15%, and parent company Wynn Macau’s share price fell 4.70% during the same period.
Sands, Wynn and other Macau casino stocks are worth considering
Wieczynski lowered his price targets for Sands and Wynn to $69 and $135, respectively, but that still represents significant upside potential for both companies. Wynn closed at $91.56 today and Sands closed at $45.79.
Both will benefit as Macau's gross gaming revenue (GGR) this year is at pre-coronavirus levels. S&P expects GGR this year to reach 85% to 90% of pre-coronavirus levels, up from its previous forecast of 75% to 85%. S&P expects a full recovery in 2024. This is particularly important for Sands, which, along with rival Galaxy Entertainment, ranks among the top spots among mass and premium mass gamblers visiting Macau.
While GGR is expected to be soft in September due to the aforementioned typhoon-related lockdowns, the upcoming Golden Week holidays may provide a significant opportunity to counter the argument that China's economy is weak.
"We believe the second half of 2024 will be very compelling for Macau-centric brands," Wieczynski added. "Not only has the stock significantly underperformed our cover universe since the start of the year, but it has also underperformed our cover universe over the past two The same is true in March. We believe that China’s macroeconomic concerns are the main reason for the recent weakness in the stock market.”
Preference for Wynn
While Wyczynski had positive things to say about Sands China's parent company, Las Vegas Sands Corp., he also praised his preference for Wynn and pointed to the operator's commitment to premium mass customers -- a segment that The market is more sensitive to the economy than mass market bettors.
In both cases, Sands and Wynn trade at significant discounts to historical averages, suggesting investors can eat into these companies without committing to high valuations.
“LVS is currently trading at 2.5x below its historical average, while WYNN is trading at 3x below its previous trading average,” Wieczynski concluded.
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Source: www.casino.org
