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Posting date: April 15, 2024 at 05:02h.
Last Updated on April 15, 2024 at 05:02h.
Seaport Research analyst Vitaly Umansky said that the Macau casino stock market is still a good long-term growth story, and it’s not as risky or volatile as investors may think.
Umansky, a veteran of sell-side coverage of casino gaming equities, added that global market participants’ fears about lethargy in the Chinese economy — the world’s second-largest — potentially hampering Macau stocks are overblown.
The analyst noted that while near-term uncertainty is primarily due to China’s soft economy and geopolitical worries, China’s softness hasn’t been a drag on Macau’s recovery.
The contribution from mass market bettorsUmansky predicted a compounded annual growth (CAGR), of 18%, for Macau’s gross gaming revenues (GGR) from 2023 to 2025. Analysts predicted that the mass GGR would increase by 19% during that time period, while VIP sales will grow at only 7%. Some analysts think that adding more table games and hotel rooms at the integrated resorts within the Special Administrative Region (SAR), could boost mass market visits.
MGM China could cede some share to Galaxy as it gains market share
Umansky believes that Galaxy Entertainment, one of the six Macau-based concessionaires, will gain market share in the short-term, while MGM China (which is controlled by MGM Resorts International, NYSE: MGM) could see some losses.
The analyst added, “The key drivers for Galaxy will be the ability to grow with the recovery of the mass market while capturing premium gaming share.” According to the analyst, the company could also gain from the Phase 4 launch of Galaxy Macau. This would “significantly” increase the capacity of the casino.
MGM China, he said, has been a recent success. Gainer market share In Macau, these gains may be mitigated as competitors bring in new amenities and hotel rooms to the market.
MGM: We Predict It [China] MGM is expected to see its market share decline as newer properties are built, mass visitors increase, and more operators adopt smart table technology.
He initiated MGM coverage with a “buy rating” and $56 as the price target. This implies a 30.6% increase from today’s closing.
Melco, Sands Top Macau Stock Picks
Umansky stated that the best pick for Macau based on its valuation was Melco Resorts & Entertainment (NASDAQ: MLCO) Las Vegas Sands, the parent company of Sands China (NYSE: LVS), is an excellent long-term investment.
Sands China may lose market share in 2018, but by 2025 we anticipate a gain. [Sands China’s] GGR shares will rise from 24 to 27 percent by 2019, thanks to The Londoner being fully optimized, and the base mass recovery accelerating.
Wynn Resorts, NASDAQ: WYNN) was given a neutral rating and no price target. He noted that Macau’s VIP business is still slow.
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