Deutsche Bank Says the Time to Buy Macau Gaming Stocks Is Now (WYNN, MPEL, MGM, LVS)
The journey to any gambling and entertainment mecca is an experience that even non-gamblers often want to put in their travel bucket list. Located off the Chinese coast on the South China Sea, the Asian version of Las Vegas is no different. For gambling, shopping, dining, entertainment and more, Macau is the place to be.
This former Portuguese colony is one of the two special administrative regions of the Peoples Republic of China, the other being Hong Kong, which is just 37 miles to the northwest. In 2002, the Macau government ended the former monopoly gambling system and six casino operating concessions were granted.
The gaming analysts at Deutsche Bank A.G. (NYSE: DB) feel that high-speed rail is changing Macau’s visitor profile. The new visitor is more likely to have come from further away, spend a night in a hotel and spend more on shopping. The biggest data point for investors is Macau casinos’ total revenue soared 29.5% in March through Sunday, compared to a year ago. Backing the Deutsche Bank opinion, RBC Capital Markets raised its 2013 revenue growth forecast for Macau casinos to 10.5%, up from 10%.
Given those positive data points and share prices that have fallen as much as 14% from their peaks, the Deutsche Bank team says the time to buy the gaming stocks with exposure to Macau is now. The stocks to buy on their list trade Asian shares on the Hong Kong exchange. Here we focus on the American-traded counterparts. The following are the Macau gaming stocks to buy now.
With more than 1,000 rooms and almost 500 gaming tables in Macau, Wynn Resorts Ltd. (NASDAQ: WYNN) is a top name to buy. The Thomson/First Call price target for this Wall St. favorite is $141.
Based in Hong Kong, Melco Crown Entertainment Ltd. (NASDAQ: MPEL) owns and operates three successful resorts in Macau with more than 600 combined gaming tables. The Wall St. consensus price target for the stock is $24.60.
Long-time Las Vegas operator MGM Resorts International (NYSE: MGM), through its subsidiary MGM China, makes the list of stocks to buy. The consensus estimate for this venerable gambling name is $14.
Another Hong Kong-based gaming company, Galaxy Entertainment Group makes the list of stocks to buy now. Currently only traded on the over-the-counter pink sheets, investors may want to keep an eye on Galaxy to see if it gets Nasdaq listing.
The final name on the list to buy, for investors looking to take advantage of the staggering growth in Macau, is Las Vegas Sands Corp. (NYSE: LVS). This premiere gaming company owns and operates the Venetian Macao Resort Hotel, the Four Seasons Hotel Macao, the Plaza Casino and the Sands Macao and Sands Cotai Central in Macau. This gives it a commanding presence in this high-growth region. It is widely owned by portfolio managers, and the consensus price objective for the stock is $60.
With multiple new ways to quickly travel to this “Las Vegas of China,” more and more visitors will be attracted to Macau. It is important for investors to remember that some of these companies have powerful domestic franchises to complement their Asian properties. Plus the fact remains that the largest part of the revenue stream is from gambling. Never forget the old adage, “They don’t build those big casinos because the house loses.”