Put your money on gaming names with operations in Las Vegas and Macau because better-than-expected results could emerge from the center of Asia’s gambling industry.
At the same time, there continues to be a high level of interest in casino operators, and outside investors like U.K. buyout group Permira and state-run Dubai World are willing to pay high premiums, which is pushing up asset multiples.
There is also an increased likelihood that these three major players will be able to create future growth by capitalizing on new opportunities in the U.S. and abroad – in places like Japan, Taiwan and South Korea, the analyst said in a note to clients.
While he was previously hesitant to place any value on emerging results until more concrete details about projects emerged, the opportunity for growth, operational strength in key markets and apparent demand for gaming assets have convinced Mr. Kent to incorporate these stock drivers into his valuations.
“These stocks are inherently volatile and we expect them to be so for the next few years,” he said, highlighting possible operating glitches in Macau and potential slowdowns in demand for these assets. “But they also are showing signs of extended growth potential that will increasingly get a scarcity premium in a slowing U.S. market and as reflected by our price targets our long term bias generally remains to the upside.”
Mr. Kent boosted his price target on Las Vegas Sands to US$150 per share from US$106 and rates it a “buy.” Hold-rated Wynn moves to US$160 from US$100, and MGM to US$95 from US$85.
LVS vs. WYNN vs. MGM 1-yr chart: