Sands, Wynn Worth Targets Lowered on Latest Macau Softness
Posted on: July 9, 2024, 03:23h.
Final up to date on: July 9, 2024, 03:23h.
Following a surprisingly smooth June gross gaming income (GGR) report in Macau, an analyst modestly pared worth targets on Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN), although he stays constructive on each on line casino shares.
In a brand new report back to purchasers, Macquarie analyst Chad Beynon revealed new worth forecasts on Sands and Wynn of $58 and $126, respectively, down from $60 and $128. For Sands, which is the most important Macau operator with 5 built-in resorts, that suggests upside of 40% from the July 8 shut. Beynon’s new worth goal on Wynn implies 12-month upside of 30%.
General, we consider consensus stays conservative, significantly for WYNN, which we consider can achieve share. We proceed to be bullish on the long-term development prospects for Macau, and ranked Macau as our prime sectors in our 2024 Gaming Prime,” wrote the analyst.
He maintained “outperform” scores on each Sands and Wynn in addition to MGM Resorts Worldwide (NYSE: MGM). MGM owns of 56% of MGM China, which runs two Macau on line casino resorts. Macquarie’s worth goal on that inventory remained unchanged at $58.
Macau GGR Nonetheless Trending in Proper Route
Whereas the June numbers got here in beneath expectations, Macau’s GGR is trending in the precise path. For the second quarter, the mixed determine was $7.1 billion, or 23% beneath the comparable stretch in 2019 — the final yr previous to the coronavirus pandemic. That’s barely higher than first-quarter GGR, which was 25% beneath the identical timeframe in 2019.
Annual visits to the Asian on line casino heart trended greater within the decade ending 2019, peaking at 39.40 million in that yr, however in 2023, that quantity was 28.21 million. That suggests there’s nonetheless an extended runway for Macau operators to get again to pre-pandemic norms and, if that objective is achieved, Macau gaming equities may benefit.
Nonetheless, buyers have exercised little persistence with Macau equities in 2024 because the group is decrease by 7% whereas the S&P 500 is greater by nearly 17%. LVS, MGM and Wynn are all members of that index.
“We count on July GGR to be ~$2.4 billion or -22% vs 2019. Trying on the 3- yr pre-COVID common, July is usually +10% vs June, and we forecast July 2024E to be +8%,” added Beynon. “Looking forward to 3Q, we’re calling for $7.4 billion of GGR, which might indicate +4% sequential, +20% year-over-year, and -17% vs 2019. Consensus at the moment requires 3Q24E Macau EBITDA quarter-over-quarter to be as follows: LVS +3%, WYNN +1%, and MGM +0%.”
Mass Bettors, Non-Gaming Fare Might Carry Sands, Wynn
Integral to the broader funding thesis for Sands and Wynn is the power of these operators to seize extra share amongst mass market bettors in Macau and leverage non-gaming facilities there. These are related pursuits as a result of the enclave’s VIP market stays stagnant.
There’s proof that the operators and rivals are undertaking these aims with Sands China proving significantly adept at capitalizing on non-gaming choices whereas Wynn Macau has proven progress in pivoting to mass market gamers. These may very well be among the many explanation why Macau’s 2024 GGR determine might be strong.
“For 2024, we count on GGR of -20% vs 2019 (+28% YoY), or ~US$29.3bn, with mass persevering with to run above pre-pandemic ranges. With extra operator income development in mass and non-gaming, we mannequin for margin upside regardless of greater opex concessionaire commitments,” concluded Beynon.