An irreverent look at Wall Street
From MS:We believe the share price will rise in absolute terms over the next 60 days.Shares of Wynn Resorts have sold off around 5% since early December as concerns about its Cotai land concession have increased. This creates an attractive entry point for a near-term trade, in our view for the following reasons: (1) We estimate $230- 240 mn of 4Q10 Macau EBITDA is likely, which is 10-15% above consensus expectations of ~$210 mn (MS est of $219 mn). Strong 4Q results also imply that consensus 2011 Macau EBITDA forecasts could increase by around 5% over the next 4-6 weeks; (2) We believe concerns about WYNN's Cotai concession are overblown as WYNN isalready far along in the design phase of the project and has the balance sheet capacity to fully fund the development. We estimate a Base Case value for Wynn Cotai of $18/share and a Bull Case value of $24/share.
December 16, 2010Las Vegas Sands Corp.Recent Selloff Creates Buying OpportunityInvestment conclusion: Shares of LVS have sold off 19% since early Dec. due primarily to concerns about the LT impact of the Macau government’s revised land-granting policies and decision not to grant LVS a land concession for Sites 7&8 (and likely exacerbated by profit-taking after strong YTD performance). We believe the selloff is overdone and creates a compelling buying opportunity for the following reasons:(1) LVS’s near-to-medium term project pipeline in Macau should not be impacted by the 7&8 decision. LVS has signed land concessions for Sites 5&6 and Site 3. Labor issues could create more delays in opening Sites 5&6, but we expect LVS to retain rights to this site and phase the opening starting in 2012. The 7&8 rejection itself should be a valuation-neutral event.(2) The Macau government’s commitment to controlling supply growth should be a significant LT positive for all existing Macau operators. We believe the goal underlying the government’s revised land- granting policy is to control the pace of development and make the land process more transparent. This should help balance the LT supply / demand dynamics in a market where the LT demand drivers remain strong.(3) Recent selloff creates compelling valuation. . We highlight that LVS is currently trading at 11x 2012 EBITDA, below the large-cap gaming average despite superior growth prospects through 2012 (growth rates 2x its peers). Assuming the decline in the stock price is all Macau, we estimate that the market is now implying LVS’s portion of its Macau operations is worth 10x ‘12 EBITDA, well below the peer average. We understand how government-related concerns pressure multiples, but we believe the recent compression is overdone.(4) We remain comfortable with our 4Q estimates.Investment Thesis: We rate LVS O/W based on our expectations of (1) continued ramp in Singapore, (2) strong mass-market positioning in Macau, and (3) a strengthening FCF profile. Our PT remains $50.]
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