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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Analysts upgrade Wynn, Las Vegas Sands

5 January 2010

LAS VEGAS, Nevada -- Wall Street analysts upgraded the prospects of two Las Vegas-based casino operators based on the companies' holdings in Macau.

Simultaneously, Macau media reported gaming revenue in the Chinese gambling market jumped 48 percent in December.

The news sent shares of Wynn Resorts and Las Vegas Sands Corp. higher Monday. The companies are also publicly traded on the Hong Kong Stock Exchange.

Las Vegas Sands, traded on the New York Stock Exchange, and Wynn Resorts, traded on the Nasdaq National Market, showed significant gains when trading began Monday. Las Vegas Sands closed at $16.62, up $1.68 or 11.24 percent. Wynn closed at $63.96, up $5.73 or 9.84 percent.

UBS Securities raised its ratings in Wynn and Las Vegas Sands, believing both companies will profit as gambling picks up stronger traction in Macau in 2010.

Wynn expects to open Encore at Wynn Macau this spring while Las Vegas Sands plans to restart its development pipeline on the Cotai Strip, which has been stalled for more than a year because of financing issues.

UBS raised Las Vegas Sands and Wynn both to "buy" from "neutral" valuations.

Goldman Sachs gaming analyst Steven Kent reinstated coverage of Las Vegas Sands at neutral Monday, saying the company will also benefit from the opening of its $5.4 billion Singapore project, the Marina Bay Sands, in April.

"Las Vegas Sands is in a better position, both financially and from an operational perspective, than it was just a few quarters ago," Kent told investors. "In addition, the restart of construction in Macau and the Singapore opening provide a growth path."

Meanwhile, Macau media reported that gaming revenues grew during December, far above what analysts had projected.

JP Morgan gaming analyst Joe Greff said the results were "driven by extremely strong performance and traffic during the last week of the month."

Susquehanna Financial Group gaming analyst Robert LaFleur said Macau gaming revenues had been expected to improve based on comparisons with 2008, when visa restrictions on tourism from Mainland China and the overall global economy impacted the region's results.

Union Gaming Group principal Bill Lerner told clients Macau's December gaming revenue growth mirrored increases of 53 percent in September, 42 percent in October and 59 percent in November.

He thought the Beijing government might again try and limit revenue growth in Macau through new visa restrictions and other means.

"We believe this relates to a desire for continued social and financial stability amongst the population, while too much growth in Macau might underscore credit, currency, and money flow dynamics that are incongruous with such policies," Lerner said in a research note.