Casino stock are for the most part higher since the start of 2017, but the longer-term outlook in the important Macau gaming market remains a question mark. One of the most notable casino operators, Las Vegas Sands Corp. LVS generates nearly half of its entire EBITDA in Macau.
The Analyst
Morgan Stanley's Thomas Allen.
The Rating
Allen upgraded Las Vegas Sands' stock from Equal-weight to Overweight with a price target boosted from $65 to $72.
The Thesis
Macau's total gaming revenue is expected to grow at a 10 percent compounded annual growth rate through 2022 due to improving infrastructure, continued development in the region, and China's transition towards a high income economy, Allen said in the note. As such, the analyst also upgraded his "Macau Gaming industry view" to Attractive and Las Vegas Sands is the recommended "blue chip in the space."
Las Vegas Sands generates 45 percent of its total EBITDA from Macau and boasts three times more rooms in the region than its closest competitor -- a lead that is secure for the time being, the analyst wrote. On top of that, Las Vegas Sands holds a leading 30 percent market share in the mass market segment. As such, the company can still grow its EBITDA at a 10 percent compounded annual growth rate over the years.
The macro drivers that will help boost Macau's gaming region will also benefit the Singapore gaming market where Las Vegas Sands is one of just two operators.
Price Action
Shares of Las Vegas Sands were trading higher by around 1.5 percent Tuesday afternoon and hit a new 52-week high of $68.41.
Casino Stock Investors Show Concern With Macau's 'Golden Week' Performance
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