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Morgan Stanley Getting More Bullish on Casino & Gaming Sector: Boosts Estimates, Targets on LVS, WYNN, Upgrades MGM

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Morgan Stanley's Thomas Allen stuck his neck out in a research note from Tuesday morning, giving a very favorable outlook on the Casino & Gaming sector amid continued momentum in Macau and a more optimistic view on sector growth.

Allen had this to say about Macau's 2014 outlook: “Following stronger-than-expected momentum in 4Q13, as a firm we are increasing our 2014 Macau gaming revenue growth estimate from 13 percent to 18 percent, driven by 28 percent growth in mass market and 13 percent in VIP. We have been most surprised by the fact mass revenue has accelerated despite the lack of new hotel rooms or significant visitation growth, but understand now that the mix shift to higher quality/premium mass visitors can have a more profound effect.”

Praveen Choudhary, a member of Morgan Stanley's Asian Gaming & Lodging team, noted his three largest concerns:

  1. valuation;
  2. labor / room supply shortages, and
  3. license expiry.

Turning to the Las Vegas market, Allen noted, “U.S. operators are clearly more bullish on Las Vegas trends heading into what is widely expected to be an impressive 1Q14 due to a strong convention calendar.”

That being said, Allen boosted estimates and price targets across the board on the US operators. The analyst also upgraded his investment recommendation on shares of MGM (NYSE: MGM)

Allen is above the consensus for MGM's 2014 EBITDA for both the Las Vegas and Macau market and raised his price target from $21 to $28.

As for Las Vegas Sands (NYSE LVS), Allen has the company as best positioned in Macau; he sees a 60 percent increase in the 2014 EBITDA of LVS's Sands Cotai Central property.

Wynn Resorts (NASDAQ: WYNN) is noted by Allen as having “higher market growth and an improving competitive position in Macau." The analyst increased the price target to $212.00 from the prior $167.00, implying a 11 percent upside with the current dividend.

Looking to the market, all three companies ended up on Tuesday. MGM saw the biggest rise of 4.39 percent with an ending price $24.51, WYNN 2.88 percent and ending price of $201.51, Finally, LVS 2.21 percent and ended at $78.98

Latest Ratings for LVS

Nov 2017Morgan StanleyUpgradesEqual-WeightOverweight
Oct 2017NomuraMaintainsNeutral
Oct 2017Deutsche BankMaintainsHold

View More Analyst Ratings for LVS
View the Latest Analyst Ratings

Posted-In: Analyst Color News Upgrades Price Target Global Analyst Ratings


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