While Wynn Macau has a higher exposure to VIP than its peers in Macau, investors are neglecting the company’s strong position in the fast-growing premium mass sector, said analysts from Bernstein on Monday.
“Wynn Macau has always been perceived by investors as overly exposed to VIP due to its product positioning. As such, among Macau gaming stocks, Wynn Macau's shares are usually more volatile and heavily impacted by news flow that is favorable or unfavorable to the VIP segment,” said Bernstein.
“Accordingly, Wynn Macau's shares have suffered the most since U.S.-China trade tensions heightened beginning in mid-2018.”
However, Bernstein analysts said it believes the market has overreacted to the VIP GGR decline environment, overemphasizing Wynn's premium/luxury positioning while neglecting Wynn's strong position in the fast-growing Premium Mass sector, its superior operation and marketing capability, strong brand, and the potential growth opportunities at Wynn Palace.
The brokerage has rated Wynn Macau as “Outperform”, with both Wynn Macau and Wynn Resorts stock trading below -1 standard deviation historical average.
“Based on the history of trading in these stocks, the risk/reward skew is now grossly unbalanced with strong favorability to upside potential,” said Bernstein.
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