US Casino Companies Face Potential Threat from Trump's Tariffs
Casino Operators Feel the Heat as US-China Tensions Escalate
The ongoing feud between the United States and China is causing ripples, and this time, the unlucky victims are US casino operators heavily invested in Macau. According to Morningstar Equity Research, the escalating geopolitical risks and recent decisions from the White House are increasing the risk premium on stocks tied to Macau's gaming industry.
In a recent note, Dan Wasiolek, senior equity analyst at Morningstar, revealed that the firm has revised its valuation outlook for several major casino operators, including Las Vegas Sands, MGM Resorts, and Wynn Resorts. The estimated fair value for Las Vegas Sands dropped from $56 to $53 per share, while MGM Resorts saw a decrease from $49 to $46 per share. Interestingly, the estimate for Wynn Resorts remained unchanged at $111.
The worry revolves around Macau's significance to these companies. Wynn Resorts owns Wynn Macau Ltd, which manages two casino resorts in the city. Las Vegas Sands owns Sands China Ltd, which operates a group of resorts including The Venetian Macao, The Parisian Macao, and The Londoner Macao. MGM Resorts, on the other hand, holds a majority stake in MGM China Holdings Ltd, which also operates two large casino properties in Macau. All these subsidiaries are listed on the Hong Kong Stock Exchange.
Morningstar's analysis reveals that a significant portion of these companies' earnings comes from Macau. By the end of the decade, approximately 60% of Las Vegas Sands' EBITDA is likely to come from Macau, while the figure for Wynn Resorts is closer to 50%. MGM Resorts, with a smaller Macau footprint, is estimated to rely on the region for about 20% of its EBITDA.
Wasiolek stated, "Trump's tariff war is moving the U.S. further toward protectionism, a shift we see lasting for the foreseeable future." This assertion is underscored by the US placing Macau on its list of "foreign adversary" jurisdictions in February, adding another layer of tension as companies weigh the long-term risks of operating in the region.
The current disruption extends beyond Macau. With China imposing a 34% tariff on all US imports starting April 10, global markets have seen sharp declines. Stocks across Asia dropped, with cryptocurrencies like Bitcoin, Ethereum, and XRP experiencing significant losses.
Despite the recent pressures, Morningstar still expects Macau's casino licenses to be renewed beyond 2032. Wasiolek is optimistic that China aims to position Macau as a global tourism hub, a goal that would require the expertise of operators like Wynn Resorts, Las Vegas Sands, and MGM Resorts.
For now, investors in the casino industry will keep a close eye on trade headlines and broader market reactions as the geopolitical chessboard continues to unfold.
[1] Morningstar Equity Research, US-China Tensions: Impact on Macau Casino Operators
[2] Macau Government Information Bureau, Trade Statistics of Macau
[4] South China Morning Post, Labor Day Golden Week to boost tourism in Macau, official forecasts a 5-6% increase
[5] Morningstar Equity Research, Macau Gaming Operators: Navigating Geopolitical Turmoil
- The escalating geopolitical risks and tariffs between the United States and China are likely to affect casino operators heavily invested in Macau, as revealed by Morningstar Equity Research.
- In the gaming industry, operators like Las Vegas Sands, MGM Resorts, and Wynn Resorts are significantly impacted by the ongoing tensions between the US and China, with a large portion of their earnings coming from Macau.
- Politics play a crucial role in the finance sector, as the US Trump administration's protectionist moves are likely to have long-term effects on the business interests of these casino operators in Macau.
- The uncertainty caused by US-China tensions extends beyond the casino industry, affecting global markets, stocks, and even cryptocurrencies, such as Bitcoin, Ethereum, and XRP.
- In the general news, it is important to track the renewal of Macau's casino licenses beyond 2032, as it could have far-reaching implications for operators like Wynn Resorts, Las Vegas Sands, and MGM Resorts, who aim to continue their involvement in the development of Macau as a global tourism hub.
