Equity research provider Morningstar says “geopolitical and U.S. policy actions increase the risk premium” for the stock prices of American casino operators with exposure to Macau’s gaming market.
Last week, U.S. President Donald Trump (pictured in a file photo) announced an additional 34-percent tariff on all Chinese goods imported into the United States. It was part of a plan establishing a 10-percent baseline tariff on imports from nearly every country, although many nations – including China – are subject to higher rates.
China stated on Friday that it would impose reciprocal 34-percent tariffs on all imports from the United States.
In late February, the U.S. administration had already added Macau to the list of “foreign adversary” jurisdictions.
Morningstar Equity Research said in a stock note on Thursday that it had adjusted its cost of equity assumptions for U.S.-listed casino operators Wynn Resorts Ltd, Las Vegas Sands Corp, and MGM Resorts International “due to their exposure to Macau” and “increasing geopolitical tensions between the U.S. and China.”
“Our reduced fair value estimates are US$53 per share for Las Vegas Sands (US$56 prior) and US$46 per share for MGM Resorts (US$49 prior),” wrote Dan Wasiolek, senior equity analyst at Morningstar.
“Our fair value estimate on Wynn Resorts’ shares remains at US$111,” he added.
Wynn Resorts controls Wynn Macau Ltd, which owns and operates two casino resorts in Macau. Las Vegas Sands is the parent of Sands China Ltd, the promoter of a portfolio of casino properties in Macau, including The Venetian Macao, The Parisian Macao, and The Londoner Macao.
MGM Resorts is the majority shareholder in MGM China Holdings Ltd, which owns and operates two casino complexes in Macau.
Wynn Macau Ltd, Sands China, and MGM China are all listed on the Hong Kong Stock Exchange.
“Trump’s tariff war is moving the U.S. further toward protectionism, a shift we see lasting for the foreseeable future,” said Mr Wasiolek.
Morningstar estimated that approximately 60 percent of Las Vegas Sands’ earnings before interest, taxation, depreciation, and amortisation (EBITDA) would come from Macau “by the end of the decade.” This compared with an estimated 20 percent for MGM Resorts and 50 percent for Wynn Resorts.
“While we will continue to monitor the macroeconomic enironment for our Macau-related coverage, we maintain our view that all six gaming concessions will get renewed and extended beyond the 2032 period,” when the current licences expire, stated Mr Wasiolek.
“Our stance is based on China’s desire that Macau be a world destination resort, which we think requires the integrated resort expertise of Las Vegas Sands, MGM Resorts, and Wynn Resorts,” he added.
