GGRAsia – Uncertainty hounds LVS, Wynn but valuation good: brokerage

Uncertainty hounds LVS, Wynn but valuation good: brokerage

Sep 18, 2018 Newsdesk Latest News, Macau, Rest of Asia, Top of the deck

Union Gaming Securities LLC says uncertainty hounds casino operators Las Vegas Sands Corp and Wynn Resorts Ltd, but that valuations of their stocks are accommodating.

In a note issued on Monday, the research house says the uncertainty is due to the Sino-U.S. trade war and its effects on the Chinese economy, and to the effect of Typhoon Mangkhut on gross gaming revenue (GGR) this month.

“It’s tough to recommend Macau today amid all of the uncertainty, particularly with more posturing from China that it could decline trade talks,” the note said.

The note was issued before the announcement on Tuesday of new tariffs on Chinese imports from the U.S.

Union Gaming said its top picks among North American gaming stocks were Las Vegas Sands and Wynn Resorts, both operators of Macau casinos.

“Las Vegas Sands is uniquely positioned to sustain any significant or prolonged deceleration or downturn in Macau,” the Union Gaming note said.

“If Macau recovers, we expect shares of Wynn Resorts will see significantly more upside, given its greater gearing to Macau and VIP overall,” it said.

“We like the risk/reward of Las Vegas Sands relative to Wynn Resorts today, and see Las Vegas Sands as a compelling way to play a rebound after a major valuation correction in Macau.”

Union Gaming has a “buy” rating for Las Vegas Sands stock and a price target of US$88.

“Las Vegas Sands is the unquestionable blue-chip stock in the sector and is particularly interesting at current levels,” the note said.

The research house has a “buy” rating for Wynn Resorts stock and a price target of US$202.

“There are still some more headwinds in Macau to navigate, including the potential lagging impact from trade wars, but if you are bullish on the medium-to-long-term in Macau and not worried about incremental volatility in the near time, Wynn Resorts is almost as cheap as it has ever been,” Union Gaming said.