Macau casino stocks set for new highs after Sands China's earnings impress
HONG KONG Oct 18 (Reuters) - Robust quarterly results from billionaire Sheldon Adelson-owned Sands China propelled shares of most Macau casinos to record highs on Friday, and more gains could lie in store as strong gaming revenue is expected for the month.
Sands China posted a nearly 43 percent jump in net revenue to $2.3 billion in the third quarter from a year earlier, sending its shares in Hong Kong surging by as much as 10.8 percent on Friday.
The surprise, according to Deutsche Bank analyst Karen Tang, was down to a faster-than-expected increase in margin growth at its Sands China Cotai casino and a successful revamp of its premium market offering at the Four Seasons Plaza.
"We think the stock is still very attractively valued because its massive room inventory gives it an unparalleled strategic advantage in Macau," Tang wrote in a note dated Friday, where she also lifted her price target for Sands China by 12 percent.
By her estimates, Sands China has about 9,300 hotel rooms, some 40 percent of the supply of four and five-star rooms in Macau - which reached 100 percent occupancy between Oct. 2 and Oct. 4, during China's Golden Week holiday.
Analysts expect Macau gaming revenue may climb to a record high in October when the data is released early next month, which could further power the sector's shares.
Price rises on Friday helped Sands China shares stretch gains on the year to 70.8 percent, compared with the 3 percent rise for the Hang Seng Index. Its robust quarterly results also buoyed the share prices of sector rivals.
SJM Holdings spiked 5.6 percent, while Galaxy Entertainment, MGM China and Wynn Macau each jumped more than 4 percent - all hitting record highs on the day.
Before Friday, Sands China shares were trading at 21.4 times forward 12-month earnings - comparable to its Macau casino sector rivals, but a 6 percent premium to its historical median, according to Thomson Reuters StarMine.
"The good result merely reconfirms the bullish market consensus on its earnings power, which is a welcomed source of certainty in this market," said Linus Yip, a strategist with First Shanghai Securities.
"I'm more surprised at the rush into the Macau casino sector today despite it being quite well-owned before this," Yip added. (Reporting by Clement Tan; Editing by Jacqueline WOng)
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