Las Vegas Sands, Wynn Are Macau Names to Remember Following Forgettable 2020

Posted on: January 4, 2021, 12:03h. 

Last updated on: January 4, 2021, 01:55h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Last year, the six Macau concessionaires won just $7.53 billion combined, as the coronavirus pandemic forced the worst annual gross gaming revenue (GGR) tally in the special administrative region (SAR) since 2006. But analysts are optimistic about rebound prospects in 2021.

Wynn Palace
Wynn Palace in Macau, seen here. An analyst is bullish on that stock and shares of Las Vegas Sands for 2021. (Image: Wall Street Journal)

Coming off a 79.3 percent GGR decline last year, Macau is still grappling with sluggish play levels due in part to VIPs remaining at bay. But visitation trends are perking, indicating there could be strength in the mass and premium mass segments as 2021 unfolds.

Our current 2021 GGR growth forecast estimate is in a range of +200 percent to +250 percent,” said Stifel analyst Steven Wieczynski in a new research report.

“Our forecast compares with the current CM consensus of +224 percent (190 percent to 250 percent range). We assume the market won’t show any growth until around February (Chinese New Year time frame),” he continued. 

One catalyst in favor of operators with strong mass and premium mass client bases is that efficiencies are expected this year for individual visit scheme (IVS) travel permits. That’s something that was lacking over the last several months of 2020, as that system was restored following a multi-month suspension.

Loving LVS

Market observers believe mass and premium mass gamblers can power a Macau rebound, and that could bode well for Las Vegas Sands (NYSE:LVS). The SAR’s largest operator relies less on high-end gamblers than some of its rivals, positioning it to capitalize as the visitation levels increase.

LVS runs five integrated resorts in the Chinese territory. And it’s opening its Londoner Macau property sooner than expected.

That could help the company benefit from Chinese New Year travel. Coming off a decline of almost 14 percent in 2020, Sands is one of Wall Street’s favored gaming ideas for 2021, with some analysts saying it’s the preferred avenue for investors seeking exposure to the Macau recovery story.

“We believe LVS’ unrivaled scale and investments for the future position its Macau business to remain a leader in the world’s premiere gaming market for the foreseeable future,” said Wieczynski. “Additionally, what we view as the company’s impeccable balance sheet not only adds a level of safety and security to the story but also favorably positions the company to successfully pursue any global integrated resort development opportunities of size that come along in the future, in our view.”

Early in 2021, the rumor mill is already swirling as it pertains to LVS takeover ambitions.

A Nod to Wynn

Wynn Resorts (NASDAQ:WYNN) is another gaming stock gaining favor on Wall Street, with some analysts saying the company’s two Macau integrated resorts aren’t as VIP-dependent as some investors are led to believe.

While Wynn is known for catering to a high-end clientele in the US and Macau, it was breaking even on the basis of earnings before interest, taxes, depreciation and amortization (EBITDA) in the SAR in October and November.

“Provided VIP gaming trends show any signs of improving off of a near-term bottom, we expect to see relative outperformance in WYNN shares, given the company’s greater relative exposure to the VIP/premium mass segments of the market,” notes Wieczynski.