Oct 03, 2024 Newsdesk Latest News, Macau, Top of the deck  
Despite the share prices of Macau’s casino operators soaring by an average of more than 20 percent over the past week, following China’s unveiling of its “most comprehensive stimulus package” since the Covid-19 pandemic, stock valuations “remain undemanding,” according to a note released on Wednesday by brokerage CBRE Capital Advisors Inc.
CBRE said it saw the stimulus package as a “green light” for investing in Macau’s gaming sector, with all operators expected to benefit. However, the brokerage favoured shares in Las Vegas Sands Corp and Wynn Resorts Ltd, the respective parent companies of Macau-based operators Sands China Ltd and Wynn Macau Ltd.
Las Vegas Sands has the “largest hotel room inventory and retail footprint in Macau,” putting it in a strong position to “capitalise on increased demand and visitation,” CBRE explained. The casino operator is also expected to benefit from a favourable comparison in 2025, when construction works at its The Londoner Macau resort on Cotai are set to be completed.
Wynn Resorts, meanwhile, was highlighted as one of the “best relative value options” in the global gaming space, trading at 8.4 times its next-12-month EBITDA, compared to its 2019 average of 10.4 times. A stabilising Chinese economy is expected to support Wynn Resorts’ Macau operations, giving investors confidence in its long-term growth potential, CBRE suggested.
While Las Vegas Sands and Wynn Resorts were seen as the top picks, the report noted that the stimulus package was likely to unlock value across the entire Macau gaming sector.
CBRE noted that, despite the recent rally, Macau’s gaming stocks had still underperformed compared to the S&P 500 index over the past year.
“Even after last week’s rally, the average one-year forward EV/EBITDA [enterprise value to earnings before interest, taxation, depreciation, and amortisation] multiple for Macau gaming equities is 9.2 times,” a discount compared to the group’s 2019 average of 11.2 times, noted analysts John DeCree and Max Marsh.
Mr DeCree and Mr Marsh added that consensus estimates indicated potential revenue growth of 7.3 percent for Macau’s casino sector in 2025, which, according to them, “could prove to be overly conservative” if China’s stimulus measures are successful in boosting economic activity.
China’s latest stimulus is being hailed as its “most aggressive” since the pandemic, driven by a combination of cuts to short-term benchmark rates and the reserve requirement ratio – a monetary manoeuvre not seen since 2015, noted CBRE.
The package also includes reductions in residential mortgage rates and the easing of property purchase restrictions, aimed at stabilising housing prices. As real estate accounts for around 70 percent of household wealth in China, stabilising this sector is viewed as critical to improving consumer confidence, lowering savings rates, and ultimately driving domestic consumption, the brokerage said in its note.
While the current round of stimulus primarily focuses on supply-side economics, CBRE suggested it could be followed by more direct fiscal measures targeting demand and consumption. “We suspect this could be followed up by more direct fiscal stimulus aimed at spurring demand and consumption,” the report highlighted.
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