Here's What Could Drive Las Vegas Sands and Other Macau Casino Stocks Higher
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It used to be that in Macau, two pips on a pair of dice—snake eyes—were the most unwelcome sight. Now it’s two lines on a Covid-19 test. Indeed, the most recent outbreak of the virus on the island has Citigroupforecasting that a broader reopening won’t begin until the first quarter of 2023. Yet that doesn’t mean the casino stocks aren’t a buy now.
Most investors are willing to look past the current Covid outbreak, even if it once again pushes back the timeline of a fully recovery for the Chinese gaming hub, analyst George Choi writes. That’s because they have confidence that, in the fullness of time, will come back—an argument that Barron’s has made as well.
Yet Choi believes there’s reason to buy the stocks now, not only in anticipation of a reopening, but because later this year they could get a boost from license renewals. He cites the “much-lower-than-anticipated regulatory risks after Legislative Assembly’s passing of the Gaming Law amendments in June,” which bodes well for the process.
If that process follows roughly the same timeline it did back in 2001, it would mean that the license re-tendering would need to start as early as August. And with Genting Singapore(GIGNY) saying it’s uninterested in expanding in Macau, that takes the incumbent casinos’ “biggest potential challenger,” off the table writer Choi, increasing the likelihood that those six incumbent operators will get new licenses.
While perhaps not as meaningful as a full reopening, having the license issue settled could be the next catalyst for the stocks, writes Choi, even before the winners are likely to be announced in November.
Among U.S.-listed stocks, he reiterated Buy ratings on Las Vegas Sands(LVS), Melco Resorts & Entertainment(MLCO), MGM Resorts International (MGM), and Wynn Resorts(WYNN). That said, he tweaked his price targets lower, to reflect ongoing reopening delays; that takes his target on Las Vegas Sandsto $56 from $57, on Melco to $11 from $12.50, on MGM to $56 from $59, and on Wynn to $87.50 from $92.
