Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Equity Bottom-Up

<ul>
<li>Wynn Resorts Ltd. Q3 Macau performance triggers an entry point around $100.</li>
<li>Wynn Palace revenue spiked 39.1%. Management announced plans to expand its 1,700 rooms to 3,000 aiming at an EBITDA production of US$1 bn by 2021/2.</li>
<li>Wynn Macau market share steady in the 15% to 17% range indicating minimal cannibalization.</li>
</ul>


Wynn Resorts Ltd. Q3 Macau performance triggers an entry point around $100.
Wynn Palace revenue spiked 39.1%. Management announced plans to expand its 1,700 rooms to 3,000 aiming at an EBITDA production of US$1 bn by 2021/2.
Wynn Macau market share steady in the 15% to 17% range indicating minimal cannibalization.


Macau Sector: Wynn Resorts Ltd Oversold on Bearish Macro Outlook that Is a Pause Not a Trend

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Thematic (Sector/Industry)

We advise clients to cut their long exposure to China as domestic macro downside, currency risk and the US-China tensions intensify.  These risks are largely secular, and thus cannot be remedied by traditional cyclical policy tools such as RRR cuts and fiscal stimulus.  The market clearly is showing resistance to conventional policy interventions, including the rate cut this weekend.   We have significantly adjusted the rating composition of stocks in our coverage to express our bearish view on future corporate earnings coming out from China.  Among 49 stocks in our coverage universe, we recommend 5 longs (12% of total), vs. 18 shorts (37%).  25 stocks (51%) are do-nothing, meaning that the current share prices are largely in line with stock fundamentals and sentiment.

We advise clients to cut their long exposure to China as domestic macro downside, currency risk and the US-China tensions intensify.  These risks are largely secular, and thus cannot be remedied by traditional cyclical policy tools such as RRR cuts and fiscal stimulus.  The market clearly is showing resistance to conventional policy interventions, including the rate cut this weekend.   We have significantly adjusted the rating composition of stocks in our coverage to express our bearish view on future corporate earnings coming out from China.  Among 49 stocks in our coverage universe, we recommend 5 longs (12% of total), vs. 18 shorts (37%).  25 stocks (51%) are do-nothing, meaning that the current share prices are largely in line with stock fundamentals and sentiment. 

Market Unfazed by China’s RRR Cut, RMB Depreciation, Escalating US-China Tension Beyond Trade

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In last week’s Compass we noted the S&amp;P 500 was near the top end of the uptrend channel and that the index could fall 2.75%-3.25% before we get to uptrend support. Considering the S&amp;P 500 fell roughly 1% last week we believe the recent pause appears to be a normal and healthy pullback within the multi-month uptrend. Despite the potential for additional backing-and-filling toward the uptrend support, our expectation is that this uptrend continues, supporting our overall positive outlook.

In last week’s Compass we noted the S&amp;P 500 was near the top end of the uptrend channel and that the index could fall 2.75%-3.25% before we get to uptrend support. Considering the S&amp;P 500 fell roughly 1% last week we believe the recent pause appears to be a normal and healthy pullback within the multi-month uptrend. Despite the potential for additional backing-and-filling toward the uptrend support, our expectation is that this uptrend continues, supporting our overall positive outlook.

S&P 500: A Pause in the Uptrend - More Consolidation Expected.

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

<ul>
<li>Improving asset turnover, good gross profit return, and low correlation with Western stock markets relative to its sector</li>
<li>Wynn is the second-largest casino operator in Macau by revenue, but no. 1 by exposure to high-rollers. Macau gaming industry benefits from an ongoing recovery in Chinese demand as anti-corruption measures wane</li>
<li>Continued ramp-up of the Palace and a US$100m renovation of the Peninsula starting in 2H18 to support sales growth, up by 23% in 1Q18 YoY</li>
<li>Trades at 18CE* PEG ratio of 0.3 versus Asian Consumer Discretionary at a PEG ratio of 0.6 and offers a better dividend yield</li>
<li>Risk: The planned opening of a new rival casino nearby could reduce demand and revenue, high leverage</li>
</ul>* Consensus Estimates


Improving asset turnover, good gross profit return, and low correlation with Western stock markets relative to its sector
Wynn is the second-largest casino operator in Macau by revenue, but no. 1 by exposure to high-rollers. Macau gaming industry benefits from an ongoing recovery in Chinese demand as anti-corruption measures wane
Continued ramp-up of the Palace and a US$100m renovation of the Peninsula starting in 2H18 to support sales growth, up by 23% in 1Q18 YoY
Trades at 18CE* PEG ratio of 0.3 versus Asian Consumer Discretionary at a PEG ratio of 0.6 and offers a better dividend yield
Risk: The planned opening of a new rival casino nearby could reduce demand and revenue, high leverage
* Consensus Estimates

Wynn (1128 HK): Solid Revenue Momentum in Macau

<ul>
<li>China trade war fears shake the sector, but Wynn fundamentals are solid. The stock took a bigger percentage hit than others in the sector, down US$35 since the May high.</li>
<li>Hainan rumors way overblown have also spooked the sector.</li>
</ul>Wynn's Boston Encore project regulatory risks overblown as well, according to our sources.Note: All amounts shown in USDThe US/China tariff scare has understandably sent jitters through world markets, shaving over 300 points of the Dow alone prior to today's open. The…


China trade war fears shake the sector, but Wynn fundamentals are solid. The stock took a bigger percentage hit than others in the sector, down US$35 since the May high.
Hainan rumors way overblown have also spooked the sector.
Wynn's Boston Encore project regulatory risks overblown as well, according to our sources.Note: All amounts shown in USDThe US/China tariff scare has understandably sent jitters through world markets, shaving over 300 points of the Dow alone prior to today's open. The…

Wynn Resorts Ltd: Perceived Trade War Headwinds Create a True Bargain Entry Point Here at US$166

United States

Wynn Resorts, Limited owns and operates luxury hotels and destination casino resorts in Las Vegas, Nevada, Macau, and China. The Company offers amenities such as guest rooms and suites, restaurants, golf course, and an on-site luxury automotive dealership.

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Wynn Resorts (WYNN US)

Macau Sector: Wynn Resorts Ltd Oversold on Bearish Macro Outlook that Is a Pause Not a Trend

Wynn Resorts Ltd. Q3 Macau performance triggers an entry point around $100. Wynn Palace revenue spiked 39.1%. Management announced plans to expand...

Howard J Klein

Market Unfazed by China’s RRR Cut, RMB Depreciation, Escalating US-China Tension Beyond Trade

We advise clients to cut their long exposure to China as domestic macro downside, currency risk and the US-China tensions intensify. These risks...

JL Warren Capital

S&P 500: A Pause in the Uptrend - More Consolidation Expected.

In last week’s Compass we noted the S&P 500 was near the top end of the uptrend channel and that the index could fall 2.75%-3.25% before we get...

Vermilion Research

Wynn (1128 HK): Solid Revenue Momentum in Macau

Improving asset turnover, good gross profit return, and low correlation with Western stock markets relative to its sector Wynn is the...

A. Stotz Investment Research

Wynn Resorts Ltd: Perceived Trade War Headwinds Create a True Bargain Entry Point Here at US$166

China trade war fears shake the sector, but Wynn fundamentals are solid. The stock took a bigger percentage hit than others in the sector, down...

Howard J Klein

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