Veteran Seaport Research Analyst, Vitaly Umansky, recently indicated the robustness of Macau-based casino stocks. According to him, the securities in question are emblematic of long-term, secular growth and far less volatile than widely perceived by investors.
Despite the Chinese New Year around the corner, luminous vibrant festivities are already coloring the region. As droves of Chinese travelers convene at the epicenter of Asian gaming, analysts suggest that these festivities could trigger a lottery win for a number of Macau stocks.
Umansky, a seasoned authority working on the sell-side of casino gaming stocks, believes fears of an economic slowdown due to China’s globally ranked second economy are largely exaggerated. Investor uncertainty, while perceivable, largely arises from a perceived economic softness in China along with geopolitical concerns. However, according to Umansky, these factors haven’t dented Macau’s recovery but have simply been overemphasized.
Strong revenue influx from mass market gamblers has propelled a promising trajectory for Macau casino stocks. Umansky forecasts an impressive 18% compound annual growth rate from 2023 through 2025, credited to the region’s gross gaming revenue. The gaming industry expects mass gross gaming revenue to spike 19% over this period, while VIP sales’ projection stands at a comparatively modest 7%. The augmentation of more hotel rooms and table games at integrated resorts could further drive mass-market visitation, resulting in an even more optimistic scenario.
Umansky observes Galaxy Entertainment could increase its market share in upcoming years. However, MGM China, a 56% majority-owned entity of MGM Resorts International, may lose some of its shares. Factors that could contribute to Galaxy’s success include expansion into premium gaming market shares and base mass recovery. Moreover, Galaxy’s new launch, Phase 4 of Galaxy Macau, could significantly elevate its capabilities.
Umansky acknowledges recent strides of MGM China in gaining a sizeable market share. However, this momentum could lose steam as competitors introduce more appealing amenities and hotel rooms.
Current leader MGM China may lose some share due to new entrants, increased base mass visitation, and the introduction of smart table technologies. Nevertheless, Umansky assigns a “buy” rating to MGM, setting a $56 price target, optimistic of a potential upside of 30.6% from the current closing price.
From among all Macau stocks, Umansky expresses the greatest confidence in Melco Resorts & Entertainment and Sands China parent, Las Vegas Sands, from a valuation and risk-reward perspective respectively. Despite current speculation that Sands China might face some market share loss, Umansky predicts a rise in the company’s gross gaming revenue shares to 27% by 2025, up from 24% in 2019, especially after fully optimizing The Londoner.
Umansky indicates a “neutral” outlook for Wynn Resorts, suggesting its Macau unit could face hindrances owing to the lagging VIP business and lack of offerings appealing to mass market customers.