Sterne Agee Gets Very Positive on Macau Casinos

24/7 Wall St.

Apparently things continue to improve in the world of Macau casinos. A new report from Sterne Agee's David Bain is raising expectations for the leaders such as Melco Crown Entertainment Ltd. (MPEL), Las Vegas Sands Corp. (LVS), MGM Resorts International (MGM) and Wynn Resorts Ltd. (WYNN).

Based on island data checks and other factors, Sterne Agee has raised its third-quarter EBITDA forecasts. It sees upward revisions in Macau-related earnings, followed by another boost to consensus after most earnings reports. The firm even believes that current valuations may be deceiving and cheaper than they appear.

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Melco Crown Entertainment Ltd. (MPEL) has a Buy rating, deemed winning from the City of Dreams mass table revenue up 71% from a year ago. More boosts are coming from the Macau Studio City, near-term dividend news and potential expansion into Japan and/or Taiwan. After raising estimates, Sterne Agee's price target was raised to $43 from $34, based on a sum-of-the parts model, versus a $33.94 recent price.

Las Vegas Sands Corp. (LVS) is rated as Buy, and its estimates were raised as well. Sterne Agee is forecasting overall Macau mass table revenue growth of 61%. Drivers here are the ramp up at Cotai Central, discussion of a regular dividend, balance sheet optimization and share buybacks. Sterne Agee raised its price target to $73 from $67, based on its sum-of-the parts model, versus a $68.33 recent price.

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MGM Resorts International (MGM) is rated as Buy, and the firm's sum-of-the-parts model is raised to $24 from $21, versus a $20.46 close. Sterne Agee is forecasting Macau mass table revenue growth of 25% and VIP rolling growth of 27%. It believes that the Cotai project is on time and on budget.

Wynn Resorts Ltd. (WYNN) actually is rated Neutral, but the price target was raised to $163 from $132, based on the sum-of-the-parts model, versus a $166.61 recent price. The firm is forecasting mass table revenue growth of 15% and VIP rolling growth of 9%.

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