CONSIDERING ????? China's Gambling Industry Is About to Bounce Back
Las Vegas still remains the U.S. destination for American gamblers.
In China, however, Macau is the go-to gambling hub.
Even though Sin City has a bigger population, more visitors, and a higher per-visitor gambling budget, Macau's annual gaming revenue dwarfs that of Las Vegas despite having nearly half the operating casinos.
Macau gambling faced early pressures to start the year. But revenue increased by 1.8% in May to $3.2 billion for the month. That increase, according to the nation's Gaming Inspection & Coordination Bureau, followed two months of declines in March and April.
Macau gambling has been on the rise in recent years. Last year alone, the Macau sector jumped 14% year over year to reach $37.6 billion in revenue.
However, the big challenge is that high rollers aren't betting the way that they used to…
VIP revenue declined at major properties sharply. Gaming promoters and trade association members have blamed mainly the ongoing trade war for the disappearance of high rollers, which comprise a significant chunk of revenue for the casinos in the region.
It's worth noting, however, that with economic stimulus likely on the horizon and support from the nation's central bank, Macau should start to see an uptick in those visitors as we move into the second half of the year. Also, the IMF has recommended that the region create incentives for the operating casinos to bolster tourism rather than relying on VIP revenue.
This Is the Macau Gambling Stock to Buy
Investors should start to purchase Wynn Resorts Ltd. (NASDAQ: WYNN).
Two key trends are favorable for the company through the rest of the year.
First, China's economic policy.
Yes, Macau gambling has been under pressure. But the flattening of China's economic prospects will likely fuel an uptick in economic stimulus, which will provide the fuel necessary to boost Macau's second half earnings in 2019.
VIP gambling revenue at Wynn's two primary Macau properties fell sharply during the first quarter, which led to 18% and 40.3% year over year declines.
However, Wynn anticipates that the VIP market will recover in the coming months despite increased competition from resorts in places like Vietnam.
But the real news isn't in China.
It's in Boston…
Why Wynn Is Expanding to Boston
Wynn is about to complete the last detail of its new Encore Boston Harbor. This resort is the firm's expansion in the United States outside of the Las Vegas market.
However, despite all the anticipation, the news around its Boston expansion has been mainly negative. That's because the casino operator was forced to pay a $35 million fine to the Massachusetts Gaming Commission after failing to disclose sexual misconduct allegations against the company's founder, Steven Wynn, who resigned as CEO last year.
But that negative sentiment is actually good news for investors looking to buy the stock at cheap levels…
The $2.6 billion project, which received a favorable tax package, is set to open later this month, and it should provide a solid boost to the firm's bottom line.
The Encore features 670 rooms and will be near a metro population of 4.7 million people and one of the busiest airports on the East Coast.
This new project also alleviates Wall Street's ongoing concerns about the company's domestic growth plans over the next few years. Wynn pays an attractive 3.66% dividend right now, which is a huge premium to the current U.S. 10-year Treasury at 2.09%.
Of course, the most important number around Wynn is its stellar VQScore of 4.75.
This figure signals that Wynn Resorts is a "Strong Buy."
We project that the stock has upside of $170 per share over the next 12 months as China's gambling markets recover and the firm adds what could be an additional $300 million in EBITDA thanks to its new Boston project.
That price target represents 55% upside from Wednesday's closing price.
Secret Weapon Set to Foil China's Master Plan: The South China Sea is about to get violent, and the Chinese have an alarming new superweapon they think gives them the upper hand. Or at least that's what their war hawks think. But they couldn't be more wrong. Thanks to a small $6 U.S. defense contractor with a top-secret technology, the Pentagon has an ingenious new checkmate move designed to stop a Chinese sneak attack dead in its tracks. Click here to learn more…
AI
