Analysts at brokerage Sanford C Bernstein have rated Wynn Resorts stocks as a slightly more attractive option over the next five years than those of Wynn Macau as the two look to bounce back from the impact of the US-China trade war and softness in Macau’s high-end gaming market.
In a research note comparing the two, analysts Vitaly Umansky, Kelsey Zhu and Eunice Lee predict Wynn Resorts to deliver 11% compound annual growth rate (CAGR) between 2019 and 2023 compared with 10% for Wynn Macau, driven by a more diversified portfolio and ramp of Encore Boston Harbor which is set to become “the best performing asset in the US regional market.”
Notably, however, Bernstein describes the two stocks as its two top picks in the global gaming space given their close links – Wynn Resorts owns 72% of Wynn Macau – with Wynn Macau the more volatile of the two given its reliance on a single market only.
“In the end it’s a trade-off between liquidity and relative Macau exposure,” the analysts said.
“From a trading liquidity perspective, the average daily dollar turnover for Wynn Resorts is nearly 10x that of Wynn Macau, one reason why certain investors favor Wynn Resorts. Daily trading volume is ~2% of total shares outstanding for Wynn Resorts and ~0.2-0.3% for Wynn Macau.
“Historically, Wynn Resorts has also been trading at a ~10% discount to Wynn Macau as ~30% of Wynn Resorts’ profits came from Las Vegas (with more coming from Boston in the near term), which is a slower growth market compared to Macau and warrants lower multiple.
“We would show a slight preference to own Wynn Resorts over Wynn Macau as it has a more diversified portfolio, better trading liquidity and less demanding valuation,” although, “In the end, Wynn Resorts stock performance is still likely to be most impacted by what happens in Macau.”
