Brokerage Sanford C. Bernstein Ltd says it has recently noticed “a significant amount of investor interest” in shares with exposure to the Macau gaming market.
“Investor sentiment is improving and investors are eager to see signs that will allow them to pull the trigger on an investment decision,” analysts Vitaly Umansky, Simon Zhang and Bo Wen wrote in a note released on Thursday.
They added: “We have recently had discussions with over 120 investors in the U.S. and Canada. While we still see wariness with respect to the Macau gaming sector, we are seeing a significant amount of investor interest (both existing or long-time investors in the sector and investors looking at the sector for the first time).”
Reuters news agency on Thursday reported that the stock price drop of U.S. gaming companies with operations in Macau was being seen as a buying opportunity by some influential international investors.
The report gave the example of Longleaf Partners Small-Cap Fund, advised by U.S.-based Southeastern Asset Management Inc. In their most recent commentary, the managers wrote: “Weakness in the Macau (China) gaming market provided the opportunity to purchase Wynn Resorts Ltd at a substantial discount to our appraisal.” Southeastern is now the sixth-largest holder of Wynn Resorts shares, according to Reuters. Wynn Resorts is the parent of Macau gaming operator Wynn Macau Ltd.
“There are some beaten-down sectors in China now. I would go so far as to say that Macau gaming is an undervalued asset,” Mark Kiesel, chief investment officer for global credit at Pacific Investment Management Co (PIMCO), told Reuters.
Shares of Macau gaming operators listed in Hong Kong have lost between 32 percent and 55 percent of their value over the past 12 months. The price of Nasdaq-listed Wynn Resorts shares has dropped by more than 50 percent in the same period.
“Gaming is currently one of the least crowded sectors and there is considerable capital sitting on the sidelines which could enter the space,” the Sanford Bernstein team wrote in their Thursday note.
“One significant point of agreement from investors looking to enter the space is the belief that if they wait too long, they will miss the early run in the stocks,” they added, noting “the majority of investors believe the sector has generally bottomed”.
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”We expect Goa to quickly become a US$1 billion market as it transitions to land-based casinos (from US$150 million today), which is still just a fraction of India’s total GGR potential of US$10 billion to US$17 billion”
Analyst at Union Gaming Securities Asia