In the wake of escalating geopolitical tensions and shifting economic policies, major U.S. casino operators such as Wynn Resorts, Las Vegas Sands, and MGM Resorts International are being compelled to reassess their financial strategies. Their substantial operations in Macau, a region now fraught with heightened risks due to U.S.-China relations, lie at the heart of these strategic adjustments.

Enhanced risk management in financial strategies:

Recent policy shifts have particularly impacted the cost of equity assumptions for these casino behemoths, necessitating revisions to accommodate the increased risks associated with their substantial footprints in Macau. Analysts at Morningstar have noted an uptick in the risk premiums assigned to these companies, attributing this change to their significant exposure to the Macau market.

Las Vegas Sands, with approximately 60% of its EBITDA projected to originate from Macau by the end of the decade, has seen its risk premium increased by 1.5%. Wynn Resorts, which derives half of its earnings from this region, continues to carry a similar 1.5% risk premium. MGM Resorts, which has a lesser exposure with about 20%, is subject to a lower risk premium of 0.5%.

In a move reflecting its relatively stronger balance sheet, Las Vegas Sands has also seen a reduction in its cost of debt. Adjusted from 8% to 6.5%, this shift contrasts with the unchanged 8% cost of debt maintained for both MGM and Wynn, reflecting their non-investment-grade credit ratings.

Reevaluated fair value estimates and market projections:

With these risk adjustments, Morningstar has revised its fair value estimates for the implicated casino operators. Las Vegas Sands’ fair value estimate has been adjusted downward from $56 to $53 per share. Similarly, MGM’s estimate has decreased from $49 to $46 per share. Wynn’s fair value estimate remains steady at $111 per share, indicating a sustained strong market position amidst ongoing challenges.

The broader macroeconomic environment, particularly influenced by the U.S.-China trade tensions that have been catalyzed by President Trump’s tariff strategies and China’s reciprocal tariffs, is playing a crucial role in these revisions. Morningstar continues to monitor these developments closely, adopting a cautious approach to forecasting the future of these casino operators’ activities in Macau.

Despite the financial recalibrations, there is a prevailing sentiment of confidence among industry analysts that Macau will renew all six gaming concessions beyond their 2032 expiration. This confidence is rooted in China’s strategic intent to develop Macau into a premiere global resort destination, a vision that necessitates the continued involvement of experienced operators like Las Vegas Sands, MGM, and Wynn.