The world’s largest gaming market has been a source of disagreement among analysts in recent months. In the midst of a slew of downgrades and revenue forecast reductions, Brean Capital is the latest to weigh in on Macau, initiating Buy ratings on the four major casino operators in Macau.
Macau Catalysts Ahead
Brean analysts believe that Macau’s gross gaming revenue (GGR) could surprise to the upside in the second half of 2015. Analysts believe that an increase in available rooms accompanying the 2015 Galaxy expansion (3,600 rooms) and the 2015 opening of Melco Crown Entertainment Ltd’s MPEL 4.59% Studio City resort (1,600 rooms) will be one of two driving forces behind a second-half revenue resurgence in Macau.
Analysts point to infrastructure projects, such as the $17 billion Hong Kong-Zhuhai-Macau Bridge, the Light Rail Transit system and the Taipa Ferry Terminal, as the other major driver of Macau’s future growth.
Melco Crown
Analysts believe that Melco’s “earnings are headed meaningfully higher” after the opening of Studio City in Q3 of 2015. “We would take advantage of recent weakness in the shares to build positions in Melco Crown,” analysts add in the report. Brean has a $31 target for Melco’s stock.
MGM Resorts International MGM 1.47%
Analysts believe that the opening of MGM Cotai in Macau and MGM National Harbor near the Washington, D.C. area will push MGM’s revenue “materially higher” by the second half of 2016. Brean has a Buy rating on MGM and a $27 target for the stock.
Las Vegas Sands Corp. LVS 3.75%
Analysts call Las Vegas Sands the “best-positioned gaming company” of the group. Analysts like Sands’ leading position in Macau, its presence in the growing Singapore market and its solid portfolio of properties on the Las Vegas Strip. Brean has a Buy rating on Las Vegas Sands and a $65 target for the stock.
Wynn Resorts, Limited WYNN 5.85%
Analysts believe that Wynn will follow up on the late-2015 turnaround in Macau with the opening of Wynn Palace in early 2016 and Wynn Everett in the Boston areas shortly thereafter. These new properties should provide a major revenue boost in 2016-2017. Brean rates Wynn a Buy and has a $174 target for the stock.
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