Analyst Note| Dan Wasiolek |
We are reducing our 2022 and 2023 Macao industry gross gaming sales forecasts to mid-20% and 60% of 2019 levels, respectively, down from 40% and 70% prior, as China’s zero-tolerance COVID-19 policy looks to endure beyond our prior expectation of mid-2022. We are removing the 0.5% China country risk premium in our Las Vegas Sands and Wynn models and instead reflecting the near-term COVID-19 and structural Macao government oversight through our uncertainty rating, which now moves to very high from high on these two operators. Our reduced 2022-23 industry forecast lowers our respective fair value estimates on Las Vegas Sands (Macao 66% of estimated 2024 EBITDA), Wynn (53%), and MGM (13%) to $50, $104, and $47, from $52, $105, and $47.50. While shares of these companies trade at a discount to our intrinsic values, we expect their price movements to remain volatile in the near term.