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Shares in Wynn Resorts Ltd have lost over half their value since
last year and those of Las Vegas Sands Corp are down nearly 40
percent from their 2014 high. Beijing's currency devaluations
have put further pressure on these companies which run gaming
resorts on the Macau Peninsula across the Pearl River delta from
Hong Kong.
Still, some influential investors think the stocks may be
oversold.
"There are some beaten-down sectors in China now. I would go so
far as to say that Macau gaming is an undervalued asset," said
Mark Kiesel, chief investment officer for global credit for
Pimco.
It owns debt in the sector, and Kiesel said he expects new
infrastructure will bring more people to the resorts.
Also enthusiastic are the managers of Longleaf Partners
Small-Cap Fund, advised by Southeastern Asset Management. In
their most recent commentary the managers wrote that "Weakness
in the Macau (China) gaming market provided the opportunity to
purchase Wynn Resorts at a substantial discount to our
appraisal." Southeastern is now the sixth-largest holder of
Wynn.
Representatives for Wynn and Sands did not return messages. Wynn
shares closed at $94.62 on Thursday, down from their high above
$246 last year. Sands shares closed at $53.12 on Thursday, down
from their high above $87 last year.
Skeptics still seem to outnumber the value-driven investors
putting money into the stocks.
Shawn Narancich, executive vice president of equity research and
portfolio management at Ferguson Wellman Capital Management,
said his firm sold about 360,000 shares of Las Vegas Sands last
year as they fell in value.
With several new resorts about to open in Macau he worries
supply may outstrip demand, especially amid other headwinds like
a Chinese anti-corruption campaign that has hurt gaming revenue
in Macau, down 35 percent in July.
"It's hard for me as a money manager to make the case to return
to the stock," Narancich said.
In commentary posted on July 27, managers of Wintergreen Fund
wrote how they sold their holdings of Wynn Macau - majority
owned by Wynn Resorts - in the first quarter of this year,
citing weakening economics.
"Without a firm or improving business environment for gaming
companies, it is very difficult for casino stocks to perform
well," they wrote.
(Reporting by Ross Kerber; Editing by Andrew Hay)
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