Equity research firm Morningstar has warned that rising geopolitical tensions and Washington’s shifting trade policy are increasing the risk premium for US casino operators with Macao subsidiaries, GGR Asia reports.
According to the industry publication, Morningstar said in a research note on Thursday that it had decreased its “cost of equity assumptions” for US-listed casino operators Las Vegas Sands and MGM Resorts International “due to their exposure to Macao” and “increasing geopolitical tensions between the US and China.”
The note was in response to Washington imposing an effective tariff rate of 54 percent on most Chinese imports, which was followed by prompt retaliation from Beijing.
[See more: US tariffs will not have a big impact on Macao’s trade, local business leaders say]
Dan Wasiolek, senior equity analyst at Morningstar, said the firm’s reduced fair value estimates were US$53 per share for Las Vegas Sands, down from US$56, and US$46 per share for MGM Resorts, down from US$49. Wasiolek also noted that Morningstar had maintained its US$111 valuation for Wynn Resorts.
Wasiolek said that while the US shift towards protectionism was seen as lasting “for the foreseeable future,” Morningstar had an overall positive outlook for Macao’s integrated resorts.
“We maintain our view that all six gaming concessions will get renewed and extended beyond the 2032 period,” he said, referring to the end of their current 10-year contracts. “Our stance is based on China’s desire that Macao be a world destination resort, which we think requires the integrated resort expertise of Las Vegas Sands, MGM Resorts, and Wynn Resorts.”
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