JP Morgan turns Bullish on LVS, PT $48 Neutral to Overweight

Las Vegas Sands rallies after JPMorgan turns Bullish and adds the stock to its analyst focus list : Jan. 11, 2022 7:41 AM ET (LVS)By: Clark Schultz, SA News Editor

JPMorgan upgrades Las Vegas Sands Corp. (NYSE:LVS) to an Overweight rating from Neutral with the risk-reward profile finally looking better on the casino stock. The firm adds LVS to its Analyst Focus List as a value pick.

The bull call on LVS arrives with the current level of investor apathy toward the Macau sector at the the worst level seen in any sub-sector within JP's coverage universe in the 22 plus years of covering the gaming and lodging sector.

Analyst Joseph Greff: "We think the risk-reward is favorable after massive share price underperformance in 2021 with LVS (and the rest of the Macau centric U.S listed stocks) lagging the rest of the re- opening sectors (U.S. Gaming, Lodging, Cruise lines) and risks priced in after a year of incremental regulatory concerns (adverse licensing renewal terms, the likely death of the junket VIP business) and the sell side cutting estimates (us, too) as travel mobility tightened/failed to ease after COVID spikes in the region.

seekingalpha.com/news/3787004-las-vegas-sands-rallies-after-jpmorgan-turns-bullish-and-adds-the-stock-to-its-analyst-focus-list

JP Morgan upgrades three US-owned concessionaires, says Macau gaming stocks undervalued

by Ben Blaschke Wed 12 Jan 2022 
www.asgam.com/index.php/2022/01/12/jp-morgan-upgrades-three-us-owned-concessionaires-says-macau-gaming-stocks-undervalued/

Law firm says alternative options available to limiting dividends under proposed Macau gaming law amendments

Investment bank JP Morgan has upgraded the stocks of all three US-owned Macau concessionaires – MGM China, Sands China and Wynn Macau – from Neutral to Overweight on what it describes as an “incrementally bullish” view of the sector.

The positive view comes with investor confidence clearly rattled and stock prices down around 60% on average from a year ago. However, JP Morgan’s DS Kim, Amanda Cheng and Livy Lyu believe this means risk/reward on gaming shares is “skewed to the upside with current sentiment as apathetic as at any time since IPOs 10+ years ago.”

Importantly, the analysts note, recent bad news around COVID-19 outbreaks in mainland China and potential travel implications over Chinese New Year has not further moved stocks – suggesting they are already at rock bottom and that pending uncertainties around license re-tendering and the VIP sector are priced in.

“We turn incrementally bullish on Macau SAR gaming,” they write. “Most investors seem hesitant to bottom-finish, citing license risks, VIP fallout and uncertain travel policies as key concerns. These are all valid, but we think the level of concern is unnecessarily high.

“First, on licenses, we think major disruptions such as license losses or tax hikes are unlikely, as suggested in the recent public consultation report.

“Second, we completely write off junkets from our models, but the impact on fundamentals isn’t that meaningful (around 10% of pre-COVID-19 EBITDA). Some may be concerned about a potential spill-over impact, but history – and our recent checks – suggest demand from premium mass or even direct VIP remains unscathed from junket fallout.

“Third, the pace of travel normalization is indeed tough to predict, but we view this as a transitory issue, something that long-term investors can look through when prices are as cheap as today’s.”

JP Morgan sees potential upside to all six Macau gaming stocks with Sands China presenting upside of 40% from its current price of HK$17.68 per share, Galaxy Entertainment Group 32% upside from HK$42.20 and Wynn 27% upside from HK$6.44.

Macau may face ratings cuts if 2023 visitation expectations decline

By Sharon Singleton - January 11, 2022
agbrief.com/news/macau/11/01/2022/macau-operators-may-face-ratings-cuts-if-2023-visitation-expectations-decline/

Macau’s gaming operators may face a downgrade in their credit ratings if visitation expectations for 2023 begin to deteriorate, Fitch Ratings said.

The firm was explaining its rationale for placing all of the operators on Ratings Watch Negative on Dec. 10th and what it may take to resolve that situation, either to the upside or the downside. Ratings watches denote a higher probability of ratings action and are generally resolved in a short period, it said.

Visitation and regulatory uncertainty are the two main factors at present affecting Macau ratings decisions, it said.

On visitation, Fitch said that the strong excess liquidity during the pandemic had allowed it to look through the disruption to 2023 credit metrics. This would be longer than the usual two-year timeframe from when they were first placed on Negative Outlook in early 2020.

However, it said that the metrics assume that Macau’s gaming revenues will return to about 90 percent of 2019 levels by next year.

“Should 2023’s expectations begin to deteriorate, negative ratings actions will likely follow to reflect the weakened growth prospects,” it said.

Fitch said China’s zero-Covid strategy is likely to mean that 2022 visitation will be extremely volatile. However, on the upside, when travel is not disrupted, transit visas are not an issue and customers are spending heavily, it said.

When it comes to regulatory risk, Fitch said that it expects the government to take a pragmatic approach and resolve the situation by the June expiry rather than take up the option to expand the concessions for a further five years.

Once the government has clarified what the new concession regulatory environment will look like and there is certainty an existing concessionaire has won a new license, it will then be able to analyse that impact on balance sheets.

At present, it said it doesn’t see the U.S. operators as facing any greater risk of losing their permits than the locals given the strong support all have given to local government policies.

For more details on Fitch rationale watch our interview with Fitch Ratings analyst Colin Mansfield