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Sands China Ltd. Message Board

  • sweetwillie101 sweetwillie101 Oct 23, 2013 5:29 PM Flag

    Barron's Article on the WYNN Site (Posted here in part)

    By Shuli Ren
    Macquarie, which till recently has been a Macau bear, has an interesting theory on why it believes the Macau ReutersExcluding insiders and top 10 shareholders, the 8 Macau stocks – MGM China, Wynn Macau, Sands China, SJM, Galaxy Entertainment, Melco Crown (MPEL), Las Vegas Sands (LVS), and Wynn Entertainment (WYNN) – have only 23.6% of their shares free floating, or $56.8 billion on the market. Melco Crown, in particular, has few shares outstanding – only 16.4% of its shares are free float.
    The broker listed a few more factors that aid the Macau rally. Here are analysts Gary Pinge and Roger Tse:
    The sector is a perfect expression of underpenetrated demand for gaming in China and Macau has a near monopoly on this expression given its proximity to China.
    The sector has positively surprised many “nay-sayers” (us included!) by consistently posting above consensus growth rates as more gaming venues have opened up. This cannot be said as true for many other consumer sectors in China.
    Macau’s gaming stocks are highly liquid, trading close to US$1bn/day and fall into many mandates including Growth, Yield, Index and Value (depending on how you value them).
    The supply in Macau in gaming facilities is constrained by limited land in Macau, the Government’s likelihood to not issue any more concessions and table game additions being constrained.
    Operating leverage is attractive. Gaming companies are relatively simple operating models where the cost base is quite fixed and operating leverage for incremental revenue generated is high.
    But being bears, the analysts have a few warnings on the Macau risks, which I think are fair and we should be aware of:
    Many compare Macau gaming operators to other China consumption peers on EV/EBITDA multiples or PERs. However doing this misses one critical difference – which is that Macau’s ga

    Sentiment: Strong Buy

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    • Thx, Willie.

      Here's the last part of the article that was cut off of your post:

      ********************************

      But being bears, the analysts have a few warnings on the Macau risks, which I think are fair and we should be aware of:

      Many compare Macau gaming operators to other China consumption peers on EV/EBITDA multiples or PERs. However doing this misses one critical difference – which is that Macau’s gaming operators are bound by a concession which ends in 7-9 years. [Barron's: concession renewal, starting 2015, is a big risk.]

      While Macau is a perfect expression for Chinese demand for gaming, what we don’t know is how far the Chinese demand for gaming has been penetrated.

 
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