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Stock Strategist

Macau's Infrastructure Improvements Good News for Gaming

Las Vegas Sands and Wynn Resorts should benefit from the completed projects.

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Our recent trip to Macau left us encouraged by the stage of completion of key infrastructure projects (light rapid transit, land reclamation, and the Hong Kong Bridge) that are essential to our forecast of mid-single-digit annual gaming revenue growth in the region over the next 10 years. In addition, third-quarter results that pointed to a solid launch for Sands’ new Parisian resort and a slow opening for Wynn’s Palace resort were well supported by our observation of foot traffic.

We are maintaining our fair value estimates and narrow economic moat ratings for  Las Vegas Sands (LVS) and  Wynn Resorts (WYNN). While our Wynn fair value estimate continues to forecast 7% annual sales growth over the next 10 years with EBITDA margins of 33% in 2025, up from 29% in 2015, the shares could experience near-term volatility as a result of short-term headwinds plaguing Palace traffic.

Dan Wasiolek does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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