[ET Net News Agency, 23 July 2020] J.P. Morgan lowered its target price for Wynn Macau
(01128) to HK$17.5 from HK$18 and maintained its "overweight" rating.
With the Guangdong-Macau travel bubble in place, the research house now modeled industry
GGR (gross gaming revenue) to return to normal levels by 3Q of 2021 on its assumption that
major travel curbs would be gradually eased by end of 2020.
JPM thinks that even the skeptics would agree that Wynn's asset quality is among the
best in Macau, if not the global gaming industry, and it is also supported by
best-in-class management. In addition, its capex cycle has already peaked (at least in the
next 2-3 years, before Crystal Pavilion capex kicks in materially), in turn suggesting a
strong FCF (free cash flow) cycle for years to come (that is, when the industry is out of
the COVID-19-anomaly).
Against this backdrop, JPM finds its valuation of 10.4x 2019 EBITDA as reasonably
attractive, especially for medium-term investors who seek strong cash-return potential
(JPM expects its regular dividend to resume next year, which implies 7% yield at current
level). (KL)