Why This Notable Analyst Continues To Prefer Las Vegas Sands, MGM Over Wynn

• Since December 28, shares of Las Vegas Sands Corp. LVS are down 10 percent, MGM Resorts International MGM shares have lost 16 percent and Wynn Resorts, Limited WYNN shares have lost 8 percent.
• Susquehanna’s Rachael Rothman maintained Positive ratings for Las Vegas Sands and MGM and a Neutral rating for Wynn, while reducing the price targets for all.
• Las Vegas Sands and MGM have more limited exposure to Macau's VIP segment and more stable EBITDA trends than Wynn, Rothman stated.

Following the 4Q preannouncements, Las Vegas Sands, MGM and Wynn are likely to report unsurprising results and investors would be more focused on the 2016 outlook, analyst Rachael Rothman said.

Wynn’s recent 4Q preannouncement suggests that despite a slowdown in demand and two new projects opening in 2015, “the promotional environment in Macau remains rational.” Over the last couple of months, trends seem to have been relatively stable.

Rothman mentioned that 2016 is a “critical year” for Macau, with easy comps through the year and hopes of the new casinos opened by Las Vegas Sands, MGM and Wynn triggering a growth recovery.

Importantly, both Positively rated LVS and MGM have a positive expected return over a 12-month time period even under our Bear case assumptions. Under our Bear case, WYNN has nearly 50% downside, however the 79% upside under our Bull case, and 3% upside under our Base case support our Neutral rating.

Las Vegas Sands

The price target has been reduced from $58 to $47. Rothman lowered the 4Q15 property EBITDA estimate from $1,147 mln to $1,059 mln, representing a 21.3 percent Y/Y decline, due to lower Macau estimates.

The EPS estimates for 2015 and 2016 have been reduced from $2.66 to $2.57 and from $2.62 to $2.28, respectively, mainly due to lower Macau GGR growth assumptions, and a shift in the opening of the Parisian from 3Q16 to 4Q16. This is expected to be offset partly by small market share gains.

MGM Resorts

The price target has been reduced from $31 to $28. Rothman lowered the 4Q15 property EBITDA estimate from $583 mln to $579 mln, representing 4.3 percent Y/Y growth. This reflects a raising of the Vegas estimates due to the QTD RevPAR trends and a lowering of Macau.

The EPS estimate for 2016 has been reduced from $0.99 to $0.90, due to lower Macau market GGR assumptions. This is partially offset by market share gains in 2016, with the pushing back of opening dates of the Cotai properties of Wynn and Las Vegas Sands.

“We forecast +11% Vegas RevPAR growth in 4Q, vs. the company’s guidance of at least 8%. We expect low-to-mid single-digit Vegas RevPAR growth in 2016, driven by a solid convention calendar,” the analyst wrote.

Wynn Resorts

The price target has been reduced from $67 to $61. Rothman projected the 4Q15 property EBITDA at $287 mln, representing 18.6 percent Y/Y growth. The EPS estimate for 2015 has been raised from $2.93 to $3.17 to reflect lower corporate expense forecasts.

The EPS estimate for 2016 has been reduced from $2.39 to $1.77 to reflect lower Macau GGR assumptions, the delay in the opening of Wynn Palace, and the flow-through of the recent market share declines.