Analyst Note| Dan Wasiolek |
We plan to adjust our cost of equity higher for narrow-moat Wynn (Macao was 76% of 2019 EBITDA) and Las Vegas Sands (59%), to account for an increased risk premium tied to increasing Chinese government oversight in the Macao gaming industry. As a result, we expect to lower our Wynn and Las Vegas Sands $114 and $59 fair value estimates, respectively, by a high-single-digit percentage. While that would still leave shares of both operators in undervalued territory, investors should expect near-term volatility given the broader uncertainty surrounding the impact of China's social policies in the gaming and other sectors. We don’t plan to materially adjust MGM’s $39 fair value estimate, given just 22% of its prepandemic EBITDA came from Macao.