China Gaming Investment Ideas
5/2/2016
It was a great session for gaming companies with exposure to Macau. The former Portuguese colony saw gaming revenue decline by 9.5%, while the street was looking for a decline of 13.5%. It’s been 23 consecutive months, and counting, but there are signs the worst is over and that a bottom has been put in –perhaps with the November revenue number (see table).
Favorite Idea The best investment in the space in our opinion continues to be Wynn Resorts (WYNN). The company has premiere properties in Macau and exposure in Singapore as well as on the Las Vegas strip. Management, including the legendary Steve Wynn, seem to have found a way to work within the constraints of Macau which has been under pressure since a major corruption crackdown began out of mainland China. Steve Wynn has also been a vocal critic of recent high roller table limits, too. Some think it was a dangerous move. I think it’s brilliant. Meanwhile, earning consensus for FY17 has been soaring from $4.14 a couple months ago, to $4.38 a month ago, to $4.52 a week ago. The chart is perfect. The shares held the 50 and 200 day moving averages perfectly, and now a close above $100 sends it off to the races.
Las Vegas Sands (LVS) is inexpensive to be sure, but the urgency factor isn’t there yet, although, to a degree, the same tide will lift all casino ships. I think we start pounding the table with the stock above $54.50. LVS
Charles Payne
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