CBRE analysts have upgraded their earnings estimates for US casino giants Las Vegas Sands, MGM Resorts International and Wynn Resorts, citing the rapid improvement in gross gaming revenues at their Macau properties since border restrictions were eased in January.
In an overnight note, analysts John DeCree and Max Marsh said they were raising estimates for 2Q23, FY23 and FY24 and maintaining their “Buy” rating on all three stocks.
The upgrades include revising their 2Q23 Adjusted EBITDA estimate for LVS to $911 million (from $844 million) due to “continued growth in Singapore from improving inbound visitation and substantial growth capex” and “accelerating recovery for LVS in Macau as it ramps hotel capacity back to more normalized levels.”
While FY23 estimates have been slightly lowered from US$3.67 billion to US$3.64 billion, FY24 estimates are up from US$4.59 billion to US$4.67 billion. FY24 Macau Adjusted Property EBITDA estimates have also been raised to US$3.02 billion (from US$2.94 billion).
CBRE has also upgraded MGM Resorts Adjusted EBITDA estimates to US$709 million (from US$645 million) for Q2, to US$2.97 billion (from $2.81 billion) for FY23 and to US$2.88 billion (from US$2.81 billion) for FY24. MGM’s Macau Adjusted Property EBITDA estimate has been upgraded to US$848 million (from US$746 million).
CBRE said MGM has “tailwinds across the globe, including the reopening in Macau, convention and international recovery in Las Vegas, impending Digital profitability, a transformational greenfield opportunity in Japan, and possibly a development in Downstate New York.
“Combine this with a fortress balance sheet and a robust share repurchase program, MGM is a compelling buy, particularly for long-oriented investors looking to get in on long-term value creation at attractive levels.”
Wynn Resorts EBITDA estimates have been increased to US$445 million (from US$408 million) for 2Q23, to US$1.80 billion (from US$1.72 billion) for FY23, and to US$2.24 billion (from US$2.16 billion) for FY24, while Macau property EBITDA estimates are raised from US$1.29 billion to US$1.37 billion.
“We continue to recommend Wynn based on attractive relative valuation, with the shares trading at 8.4x our FY24 EBITDA estimate, which is a material discount to historical levels,” CBRE said.
“We contend the market under appreciates Wynn’s recovery in Macau, the sustainability of earnings in Las Vegas, the material real estate value of its portfolio, and the company’s lucrative development project in the UAE.”
In a separate note, DeCree and Marsh said they were positive on Macau’s recovery trajectory and expect further penetration into its key mainland China market as transport access improves.
“Since China suddenly reopened in January 2023, Macau GGR bounced back relatively quickly, although at a slower pace than in the US and other Asian gaming markets,” they said. “We are encouraged by the initial trends considering the sudden reopening gave little time for casinos, consumers, or infrastructure to prepare, especially after a three-year lockdown.
“At the end of May, visitation to Macau was still 45% below 2019, leaving plenty of room for further recovery. We expect the next leg of the recovery in Macau will come from greater visitation when hotel and transportation capacity ramps back up.
“So far, the visitation recovery has largely come from neighboring Guangdong and Hong Kong. When infrastructure ramps back up, Macau should be able to draw customers from deeper into mainland China.”
