Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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<ul><li class="p1">During the past month, authorities have raided pawn shops&nbsp;in Macau that use illegal terminals, economic data in China&nbsp;has shown signs of weakening and Macau gaming revenue&nbsp;in August showed a decline of 35.5% year over year.</li><li class="p1">We&nbsp;plan to adjust our 2015 industry gaming revenue decline&nbsp;from mid-20% to low-30%, partially offset by higher growth&nbsp;in 2017-18 due to the expected completion of the Hong&nbsp;Kong-Zhuhai-Macau bridge in 2017.</li><li class="p1">With a lower revenue base, we have implemented cuts to&nbsp;our fair value estimates: down 15% for MGM China to HKD17.00 per share; down 10% for Galaxy Entertainment to HKD&nbsp;37.00 per share; down 8% for SJM Holdings to HKD 11.00&nbsp;per share; and down 8% for Sands China to HKD 33.00 per&nbsp;share.</li><li class="p1">Our fair value estimate declined by less than 5% for&nbsp;Wynn Macau; thus, we maintain our fair value estimate of&nbsp;HKD 15.00 per share unchanged</li></ul>Analysts: Brian Han and Chelsey TamFull report below the fold...

During the past month, authorities have raided pawn shops&nbsp;in Macau that use illegal terminals, economic data in China&nbsp;has shown signs of weakening and Macau gaming revenue&nbsp;in August showed a decline of 35.5% year over year.We&nbsp;plan to adjust our 2015 industry gaming revenue decline&nbsp;from mid-20% to low-30%, partially offset by higher growth&nbsp;in 2017-18 due to the expected completion of the Hong&nbsp;Kong-Zhuhai-Macau bridge in 2017.With a lower revenue base, we have implemented cuts to&nbsp;our fair value estimates: down 15% for MGM China to HKD17.00 per share; down 10% for Galaxy Entertainment to HKD&nbsp;37.00 per share; down 8% for SJM Holdings to HKD 11.00&nbsp;per share; and down 8% for Sands China to HKD 33.00 per&nbsp;share.Our fair value estimate declined by less than 5% for&nbsp;Wynn Macau; thus, we maintain our fair value estimate of&nbsp;HKD 15.00 per share unchangedAnalysts: Brian Han and Chelsey TamFull report below the fold...

Downgrading FVEs of Macau Gaming Coverage; China Economy and Policies Extend Near-Term Uncertainty

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Wynn's US operations are trading at their lowest valuation in 18 months. Meanwhile we have not seen material recovery in Macau. We would be setting a trade to long Wynn Resort and short Wynn Macau at the backdrop of its stable US operation and significant growth of Chinese tourists going to the US. Structural tourism trend. I have discussed about structural downtrend of Hong Kong's tourism in my earlier <a href="http://www.smartkarma.com/insights/hong-kong-s-future-3-structural-bears-for-retailer-tourism" target="_blank">insight</a>, at the expense of easing of visa requirement for Chinese tourists going overseas. Such bugbear for Hong Kong is at the same time a positive structural trend for other foreign tourist destinations, in particularly those developed countries offering great natural beauty and yet had strict visa policies in the past.Favorable visa policy. The US is one of them. It ranks second to France with 54% of Chinese citizen picking it as their primary aspirational long-haul destination. Since Nov 2014, the US has loosened visa policies for Chinese such that tourists would be able to obtain 10 year multi-entry visa, up from the former one year validity. It is also reported that the interview process for visa application has been relaxed such that it is easier for tourist to obtain visa. We are expecting the visa issued to Chinese to increase by 70% YoY. Chinese used to rank 6th in terms of origin of long-haul tourist and we are expecting them to rank higher. Recent surge in tourist arrivals and revenue in Wynn's domestic operation. In the first half of 2015, the US tourist arrival from China increased by 50% YoY, significantly higher 2014's 20% YoY growth. Meanwhile, revenue from its property in Las Vegas surged by 16.2% in the second quarter. Don't forget that Wynn's Everett resort in Boston is adding 50% and 115% of capacity to Wynn's domestic table and slot capacities. Airlines the crystal ball for inbound tourism growth?  On mainland China side, airlines are also riding the wave of outbound tourists by expanding capacities as if there's no tomorrow. Capacity provided by Chinese airline for the China-US route is growing at CAGR rate of 20% p.a. between 2010 and 2014. 2015 will mark the first year whereby Chinese airlines are operating a larger capacity than US airlines for this route. Since Feb this year, Chinese tourist are able to fly to the US from four second tier cities, including Shenyang, Nanjing, Wuhan and Chengdu. Flow analytics are also supportive to our setup. We see high short interest in Wynn Resorts vs. low short interest in Wynn Macau. We also see shareholders increasing stakes in Wynn Resorts and reducing stakes in Wynn Macau. Net-net, we believe long Wynn Resorts/short Wynn Macau is a safe bet to ride the structural trend. Given that Wynn Resorts are trading at 25% discount to its NaV at minus two times standard deviation from its mean, we would like to long the stub.

Wynn's US operations are trading at their lowest valuation in 18 months. Meanwhile we have not seen material recovery in Macau. We would be setting a trade to long Wynn Resort and short Wynn Macau at the backdrop of its stable US operation and significant growth of Chinese tourists going to the US. Structural tourism trend. I have discussed about structural downtrend of Hong Kong's tourism in my earlier insight, at the expense of easing of visa requirement for Chinese tourists going overseas. Such bugbear for Hong Kong is at the same time a positive structural trend for other foreign tourist destinations, in particularly those developed countries offering great natural beauty and yet had strict visa policies in the past.Favorable visa policy. The US is one of them. It ranks second to France with 54% of Chinese citizen picking it as their primary aspirational long-haul destination. Since Nov 2014, the US has loosened visa policies for Chinese such that tourists would be able to obtain 10 year multi-entry visa, up from the former one year validity. It is also reported that the interview process for visa application has been relaxed such that it is easier for tourist to obtain visa. We are expecting the visa issued to Chinese to increase by 70% YoY. Chinese used to rank 6th in terms of origin of long-haul tourist and we are expecting them to rank higher. Recent surge in tourist arrivals and revenue in Wynn's domestic operation. In the first half of 2015, the US tourist arrival from China increased by 50% YoY, significantly higher 2014's 20% YoY growth. Meanwhile, revenue from its property in Las Vegas surged by 16.2% in the second quarter. Don't forget that Wynn's Everett resort in Boston is adding 50% and 115% of capacity to Wynn's domestic table and slot capacities. Airlines the crystal ball for inbound tourism growth?  On mainland China side, airlines are also riding the wave of outbound tourists by expanding capacities as if there's no tomorrow. Capacity provided by Chinese airline for the China-US route is growing at CAGR rate of 20% p.a. between 2010 and 2014. 2015 will mark the first year whereby Chinese airlines are operating a larger capacity than US airlines for this route. Since Feb this year, Chinese tourist are able to fly to the US from four second tier cities, including Shenyang, Nanjing, Wuhan and Chengdu. Flow analytics are also supportive to our setup. We see high short interest in Wynn Resorts vs. low short interest in Wynn Macau. We also see shareholders increasing stakes in Wynn Resorts and reducing stakes in Wynn Macau. Net-net, we believe long Wynn Resorts/short Wynn Macau is a safe bet to ride the structural trend. Given that Wynn Resorts are trading at 25% discount to its NaV at minus two times standard deviation from its mean, we would like to long the stub.

Wynn's US operation undervalued, long the stub to ride structural tourist trend

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)

Downgrading FVEs of Macau Gaming Coverage; China Economy and Policies Extend Near-Term Uncertainty

During the past month, authorities have raided pawn shops in Macau that use illegal terminals, economic data in China has shown signs of weakening...

Morningstar, Inc.

Wynn's US operation undervalued, long the stub to ride structural tourist trend

Wynn's US operations are trading at their lowest valuation in 18 months. Meanwhile we have not seen material recovery in Macau. We would be setting...

Ke Yan, CFA, FRM

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