Analysts predict bright 2017 for Vegas with “Brave New Trump World”

Analysts Harry C. Curtis, Daniel Adam and Brian H. Dobson point to MGM Resorts International (MGM) as their favorite international casino play. The shares are up nearly 2% today. They write:

2017 gross gaming revenue (GGR) growth expectations have vaulted to a range of +7-20%, mostly driven by higher VIP revenue. We raise our total GGR estimate to +10% (10% VIP and 11% mass), although some VIP estimates are over 15% yr/yr. We are dubious about VIP sustainability because

Beijing policy risk increases whenever junket growth surges, as it did in November;
plugging the currency outflow through Macau is a priority; and
comps toughen beginning in September.

They say valuations of Macau casino-hotel operators are inflated and “seem not to discount policy, currency, and competitive risks. … To buy the stocks at today’s valuations, investors must be discounting growth into 2018 to justify their enthusiasm, so there is little room for disappointment.” As for Vegas, it’s all about the “Brave New Trump World,” Nomura says. Analysts expect 5% growth in revenue per available room (RevPAR) in 2017, ahead of the consensus 3.3% growth estimate, on the basis of “stronger GDP and corporate profit growth under a Trump administration” that in turn drives U.S. spending on leisure pursuits.

The winner: MGM, “with 61% of EBITDA generated in Vegas. For the first time in 10 years, MGM will be in a position to return cash to shareholders, which could meaningfully expand the universe of investors able to own the stock to include dividend/yield-seeking investors.”

Nomura’s increased its price targets by $1 each — indicating limited fresh upside – for MGM, Las Vegas Sands (LVS) (up 0.6% today), Wynn Resorts (WYNN) (up 1.2%) and Melco Crown Entertainment (MPEL) (up 3.8%): from $34/$49/$77/$13 to $35/$50/$79/$14.