Published on: October 3, 2024, 03:10h.
Last updated on: October 3, 2024, 03:10h.
Macau casino stocks experienced a significant surge last week due to monetary easing by the People’s Bank of China (PBOC) and new stimulus measures. Despite this rally, one analyst believes there is more potential upside for the industry.
In a recent report, CBRE Equity Research analyst John DeCree suggested that despite potential profit-taking, investors should consider staying engaged with Macau gaming equities due to their attractive valuation and potential for further growth.
Macau gaming equities have lagged behind the S&P500 in the past year, but current valuations and future estimates indicate room for more upside,” DeCree wrote.
DeCree also highlighted that Macau casino stocks are currently undervalued, trading at 9.2x EV/EBITDA, compared to 11.2x in 2019. The consensus suggests 7.3% GGR growth in 2025, which could be conservative given the effectiveness of stimulus measures.
LVS, Wynn Favored Among Macau Casino Stocks
DeCree expressed a preference for Las Vegas Sands (NYSE: LVS), highlighting the company’s significant room inventory and strong retail presence in Macau, positioning it well for increased visitation to the region.
Las Vegas Sands is expected to benefit from easier comparisons next year with the full availability of rooms at The Londoner. Additionally, the stock is listed among consumer discretionary names trading at discounts with potential for valuation improvement.
DeCree also sees value in Wynn Resorts (NASDAQ: WYNN), the parent company of Wynn Macau.
“While our preference lies with Las Vegas Sands and Wynn, the new stimulus could unlock both technical and fundamental value across the broader Macau gaming sector,” the analyst noted.
Further Stimulus Could Boost Macau Casino Stocks
Some market experts believe that the recent monetary easing and stimulus measures from Beijing may be just the beginning, as the Chinese economy requires more support. Direct stimulus to citizens could benefit Macau casino stocks by encouraging discretionary spending.
Nigel Green of deVere Group emphasized the need for fiscal stimulus to bolster economic demand in China.
“Increased government spending on infrastructure and consumer incentives could provide a much-needed economic boost. Investors are eager to see if Beijing will take more definitive steps to strengthen the economy, potentially leading to a stronger China,” he stated.