Billionaire investor David Tepper hasn't been shy about expressing his bullish outlook on Chinese stocks. In an interview with CNBC last week Thursday, Tepper stated that he is buying "everything" related to China after the nation launched what he called a "fiscal stimulus bazooka."
China's central bank is pulling out all the stops; they're cutting interest rates, providing liquidity support, lowering bank reserve requirements, and even encouraging company stock buybacks. These measures have already given Chinese tech stocks like Alibaba (BABA), PDD Holdings (PDD), and Tencent Holdings (TCEHY) a nice bump, and the mainland's benchmark index surged 25% in the five days ahead of Tuesday's holiday break.
Tepper's bullish stance on China also includes U.S. casino stocks, which are exposed to the Chinese market via the autonomous region of Macau, the only place in China where casino gambling is legal. The gaming industry there took a hit during COVID-19, but the massive new stimulus fuels hope for a comeback.
Two U.S. companies that could benefit are Las Vegas Sands (LVS) and Wynn Resorts (WYNN). Both have operations in Macau, but offer a way for investors to sidestep any risks associated with investing in Chinese companies.
For investors looking to cash in on China's economic rebound, LVS and WYNN might be worth a closer look. Let's dive into what these companies are up to in Macau and how they could profit from China's recovery.
#1. Las Vegas Sands (LVS)
At $38.72 billion, Las Vegas Sands Corp (LVS) is a major player in luxury resorts. Still headquartered in Las Vegas, the property portfolio is now focused on Asia, and primarily Macau. They run integrated resorts that combine fancy hotels, top-notch casinos, shopping, and entertainment. Through their subsidiary, Sands China Ltd., they manage multiple properties in Macau and one in Singapore, making them an appealing choice for investors eyeing a consumer recovery fueled by China's stimulus.
LVS has rallied recently on the China stimulus news, and is now up 7% so far in 2024. In the past month alone, the stock is up 32%.
With a forward price/earnings ratio of 21.26, LVS is priced at a slight premium to some of its competitors, though the current multiple is a discount to its historic valuations. The stock also offers a 1.54% annual dividend yield, based on the quarterly payout of $0.20 per share.
The company's focus on Macau and Singapore could be a big plus as Beijing looks ready to pull out all the stops to support the economy. In their latest earnings report, LVS reported $2.76 billion in revenue and $424 million in net income. Macau contributed $561 million to their adjusted property EBITDA of $1.07 billion, while Marina Bay Sands in Singapore added positively with a $64 million impact on its adjusted property EBITDA of $512 million. LVS also bought back $400 million of its own stock, showing faith in its financial health.
Another significant development for LVS is the collaboration between Sands China Ltd. and Marriott International (MAR) to introduce The Luxury Collection brand with the upcoming Londoner Grand at The Londoner Macao. Set to open in January 2025, this venture aims to redefine luxury experiences in Macau by blending British charm with local culture. This strategic move is expected to attract more international visitors and enhance Macau's appeal as a premier travel destination.
Analysts maintain a generally positive outlook on LVS, and recommend a “moderate buy” on average. Out of 15 analysts, 10 suggest a “strong buy,” one recommends a “moderate buy,” and four advise a “hold.” The mean target price is set at $53.00, representing a potential upside of 2.7%.
Notably, analyst Daniel Politzer from Wells Fargo raised his target price on LVS to $60 earlier this week, driven by expectations of improved EBITDA in Macau and the timely opening of the Londoner Casino during Golden Week to boost market share.
#2. Wynn Resorts (WYNN)
Wynn Resorts (WYNN) is a familiar name in hotels and casinos, with properties in the U.S. and Macau. They're known for their high-end resorts that offer gaming, entertainment, and top-notch hospitality. Their focus on luxury experiences and prime locations helps them attract high-end guests. With multiple Macau properties (Wynn Palace in Cotai and Wynn Macau in Macau City), they're in a good spot to benefit from China's recent economic moves.
WYNN's stock has done well, rising 20% over the past year and 16.3% so far in 2024. The stock is up 37% over the past month alone, bouncing back from a 52-week low of $71 in August.
With a market cap of about $11.5 billion, WYNN is priced for growth, with a forward P/E ratio of 19.43. WYNN also offers a 0.97% annual dividend yield, with the quarterly dividend set at $0.25 per share.
Wynn Resorts reported operating revenues of $1.73 billion for the second quarter of 2024, up from $1.60 billion in the same period last year. Net income was $111.9 million, compared to $105.2 million in the previous year. The diluted net income per share went up to $0.91 from $0.84 year-over-year. This growth was mostly thanks to their Macau operations, showing that the region is still recovering.
One of the big growth opportunities for WYNN is their investment in international expansion, especially the construction of Wynn Al Marjan Island in the UAE. CEO Craig Billings says this project is moving along quickly and includes a big chunk of land for potential future developments, either by Wynn Resorts or third parties that complement Wynn Al Marjan. Recently, Wynn Resorts Finance announced the pricing of $800 million in 6.250% senior notes due 2033 to help support these expansion efforts.
Analysts really like WYNN's prospects. Out of 15 analysts, 11 say it's a “strong buy,” one says it's a “moderate buy,” and three say “hold.” The forecast calls for the stock to rise to $109.34 on average, which represents a 3.3% upside its current price.
Conclusion
In conclusion, both Las Vegas Sands and Wynn Resorts are well-positioned to capitalize on the opportunities presented by China's economic stimulus and the potential resurgence of Macau's gaming industry. With impressive recent stock performances, and strategic initiatives like LVS's partnership with Marriott for a new luxury hotel in Macau and WYNN's expansion into the UAE, these companies are poised for growth. Analysts' bullish ratings further underscore their potential, making them compelling options for investors looking to ride the wave of China's economic recovery, just like David Tepper.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
