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Macquarie MarQuee Ideas
Removing Wynn Macau and Genting
Singapore from the Sell list
The strength of the gaming market growth has surprised
us and the market to the upside
We are removing Wynn Macau and Genting Singapore from the MarQuee Sell
list after three months of 2011 in which the strength of the gaming market in
Macau and Singapore has surprised substantially on the upside.
We still consider both stocks to be overvalued at this point and see possible
catalysts ahead that could propel the stocks downward – we therefore keep our
Underperform rating on both stocks; however, given the continued strength in
market growth, which shows no sign of abating, our relative conviction on these
ideas is no longer sufficient to justify inclusion in our MarQuee Ideas list.
Wynn Macau (1128 HK, HK$27.35, Underperform, TP: HK$21.40, Gary Pinge)
Genting Singapore (GENS SP, S$2.18, Underperform, TP: S$1.75, Gary Pinge)
Why we are keeping Wynn Macau as an Underperform
Our analyst Gary Pinge believes consensus is not pricing the Cotai project
accurately. Given the opening of Wynn's Cotai project is slipping closer towards
the end of Wynn's gaming concession, Gary has taken a view on what happens
at the end of the concession by assuming Wynn's super normal returns end in
2022 at the end of its concession, after which there is some terminal value.
However, he think the bulls are pricing 40% ROIs on Cotai into perpetuity - which
is aggressive as the delays being faced by Wynn will impact investment
decisions and returns the closer the property opening comes to the end of the
concession...and Wynn's prudent management team will consider these risks.
So if they will be pricing in the concession risk...why shouldn’t investors?
On Wednesday, following 1Q results, Gary upped his target price in Wynn
Macau to HK$21.40, still giving a 22% downside potential.
Why we are keeping Genting Singapore as an Underperform
Gary also believes Genting Singapore to be facing two significant hurdles in the
medium term. First, the potential for harsher regulations of “shadow” junkets and
the second the possible curtailment of credit by Genting Singapore. Although he
feels that both may weigh on the stock in the medium term, there are risks that
the positive growth momentum of the sector in Singapore may sustain the share
price.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Macquarie MarQuee Ideas
Removing Wynn Macau and Genting
Singapore from the Sell list
The strength of the gaming market growth has surprised
us and the market to the upside
We are removing Wynn Macau and Genting Singapore from the MarQuee Sell
list after three months of 2011 in which the strength of the gaming market in
Macau and Singapore has surprised substantially on the upside.
We still consider both stocks to be overvalued at this point and see possible
catalysts ahead that could propel the stocks downward – we therefore keep our
Underperform rating on both stocks; however, given the continued strength in
market growth, which shows no sign of abating, our relative conviction on these
ideas is no longer sufficient to justify inclusion in our MarQuee Ideas list.
Wynn Macau (1128 HK, HK$27.35, Underperform, TP: HK$21.40, Gary Pinge)
Genting Singapore (GENS SP, S$2.18, Underperform, TP: S$1.75, Gary Pinge)
Why we are keeping Wynn Macau as an Underperform
Our analyst Gary Pinge believes consensus is not pricing the Cotai project
accurately. Given the opening of Wynn's Cotai project is slipping closer towards
the end of Wynn's gaming concession, Gary has taken a view on what happens
at the end of the concession by assuming Wynn's super normal returns end in
2022 at the end of its concession, after which there is some terminal value.
However, he think the bulls are pricing 40% ROIs on Cotai into perpetuity - which
is aggressive as the delays being faced by Wynn will impact investment
decisions and returns the closer the property opening comes to the end of the
concession...and Wynn's prudent management team will consider these risks.
So if they will be pricing in the concession risk...why shouldn’t investors?
On Wednesday, following 1Q results, Gary upped his target price in Wynn
Macau to HK$21.40, still giving a 22% downside potential.
Why we are keeping Genting Singapore as an Underperform
Gary also believes Genting Singapore to be facing two significant hurdles in the
medium term. First, the potential for harsher regulations of “shadow” junkets and
the second the possible curtailment of credit by Genting Singapore. Although he
feels that both may weigh on the stock in the medium term, there are risks that
the positive growth momentum of the sector in Singapore may sustain the share
price.
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