Citigroup Remains Optimistic on Gaming Sector: Notes Macau Growth & Improving RevPAR in Vegas
On Wednesday, Citigroup analyst Anil Daswani analyzed the Macau gaming sector. The analyst maintained a Buy rating on four big names, optimistic on growth in Macau and improving RevPAR in Vegas.
Macau Gaming Sector
For Macau Gaming, Citigroup maintains a bullish stance. Daswani commented, "We remain bullish and believe the sector has been oversold. Recent sector concerns have hit valuations, and with GGR projections falling across the Street, expectations are low. Although there are few short-term upside catalysts, the lowered expectations could easily be surpassed."
The analyst lowered 2014 GGR estimate from 22 percent to 13 percent due to drastically lower VIP growth estimate of 2.5 percent from 15 percent. Citi noted that the gain of 7.3 percent VIP revenue year-to-date to May, implies marginal negative growth for the rest of 2014.
Daswani maintained a Buy rating on Wynn Resorts (NASDAQ: WYNN) and lowered the price target from $277.00 to $255.00. The analyst believes Wynn will continue to see solid growth in Macau and improvements in RevPAR in Las Vegas in 2014.
Noting Macau's VIP segment headwinds, Citigroup wrote, "We now forecast 2.5% growth in VIP GGR in 2014 (previously +15%). Given the VIP GGR has grown 7.3% YoY in the first five months of the year, the 2.5% growth that we are now forecasting implies marginal negative growth for the remainder of the year. On the Macau mass side, we are leaving our 2014E growth forecast unchanged at 35% (vs. 37.4% YTD). While we lower our overall Macau GGR growth forecast from 22% to 13%, we cut our Wynn Resorts 2014-16E EBITDA forecast by 3% to 5%. This led us to cut our 2014-16E earnings by 6% to 9%. "
MGM Resorts International
The analyst maintained a Buy rating on MGM Resorts International (NYSE: MGM) and slightly lowered the price target from $35.00 to $34.50. Citigroup emphasized that MGM is "most exposed" to the Las Vegas story and should "continue to benefit from its strong Macau operations and dividends from MGM China should improve its balance sheet."
Daswani lowered MGM Resorts 2014-2016 estimated EBITDA forecast by 1 percent.
Las Vegas Sands
Citigroup maintained a Buy rating and $97.00 price target for Las Vegas Sands (NYSE: LVS). The analyst commented, "Based on industry sources, LVS' market share in Macau was 22.9% in 5M14 (vs. 23.1% in 1Q14). Being the dominant player in the Macau mass market (representing ~30% of Macau's mass market in 5M14) and ~80% of EBITDA coming from Macau mass in FY14E, LVS' Macau operation continues to be one of the major beneficiaries of robust mass growth."
Daswani added that Las Vegas Sands is a Top Pick and favored candidate for the Tokyo licensing.
The analyst rates Melco Crown (NASDAQ: MPEL) as his Top Buy "as we believe Studio City is the best located casino in Cotai, situated adjacent to the Lotus Bridge border with the best access to Hengqin among its Cotai peers."
Citigroup maintained a Buy rating and $55.00 price target on the company. Daswani added that Melco is cheapest name among the Macau Large Cap operators.
Latest Ratings for LVS
|Sep 2014||Deutsche Bank||Maintains||Buy|
|Sep 2014||Argus Research||Downgrades||Buy||Hold|
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