BofA/Merrill Lifts Targets On Casino & Gaming Stocks Amid Continued Recoveries In Macau, Vegas
In a report published Tuesday, Bank of America/Merrill Lynch's Shaun Kelley raised estimates for three companies in the Casino & Gaming industry. The analyst believes improvements in both Macau and Vegas will help the group.
Kelley highlighted the following points on Macau:
- October Golden Week reads across China and Macau are positive (visits +5%, mainland +11.1%),
- Macau comps remain easy until Dec., and
- China macro is bouncing and there would be no new supply until 2H15."
The BofA/Merrill analyst boosted his 2013 gross gaming revenue estimate for Macau from 14.5 percent previously to 16 percent; he initiated a 2014 forecast for 10 percent growth.
In the Vegas region, Kelley noted, the "recovery should continue in Q3, helped by strong events (Mayweather, iHeartRadio) and strong convention business. Q3 to-date RevPAR is +3.8% driven almost entirely by rate and anecdotally, Sept. was the busiest month we have seen in Vegas since the Financial crisis."
Las Vegas Sands will have a "breakout quarter," according to Kelley, buoyed by Cotai Central.
The analyst said Wynn is "starting to more heavily discount Cotai..." Nearer term, Kelley sees catalysts related to "Vegas and prospects for a Q4 special dividend..."
On MGM, Kelley suggested, "We have underestimated the strength of the turn in MGM, most notably the strong operating leverage and expense discipline in LV, plus valuation support from MGM China. We expect a solid Q3 with upside to est's, helped by higher ADRs, cont'd Strip share gains and cost control."
Despite the bullish note, stocks in the sector are lower Tuesday. Las Vegas Sands is down 2.3 percent at last check, Wynn is down about 1 percent, and shares of MGM are down almost 3.5 percent.
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