US casinos in Macau at risk from Trump tariffs: analyst
Research firm Morningstar has devalued stock valuations of leading US casino operators as rising geopolitical tensions between the United States and China cast a shadow over their operations in Macau. The equity research firm cited growing risks tied to policy decisions and international relations, prompting it to reduce its fair value estimates for Las Vegas Sands and MGM Resorts.
Reportedly, the firm lowered estimate for Las Vegas Sands from $56 to $53 per share and MGM Resorts from $49 to $46. However, Wynn Resorts retained a valuation of $111 per share. The firm attributed the downgrades to an increased risk premium from recent political developments.
For the unaware, Macau is a key market for US casino giants and was recently labelled a “foreign adversary” by the United States. While it’s still unclear what this move will mean in practice, Morningstar has flagged it as a potential roadblock for American operators in the region. Analysts say the designation could make business much more complicated for firms like Wynn, Sands, and MGM, all of which have deep ties to Macau.
Casino market draw concerns
Last week, US President Donald Trump imposed a 34 percent tariff on China, prompting Beijing to retaliate with an equivalent tariff on American goods. Dan Wasiolek, senior equity analyst at Morningstar, has warned that any new potential new restrictions may complicate the ability of firms such as Wynn, Sands, and MGM to continue operating or reinvesting in Macau.
The threat of reduced regulatory goodwill also looms large, especially given the heavy revenue dependence these companies have on Macau. Morningstar estimates that by the end of the decade, Las Vegas Sands will generate 60 percent of its EBITDA from Macau, compared with 50 percent for Wynn Resorts and 20 percent for MGM Resorts.
The dominance of Macau in these companies’ portfolios has sparked concern among investors, who fear that worsening political relations could jeopardise future licence renewals.
No gaming concession in near future?
Although Morningstar insists that all six of Macau’s gaming concessions will probably be extended past 2032, it fears that rising tensions may cause Beijing to change its position in favor of domestic or foreign operators.
Long-term investment strategies have also come under scrutiny due to policy uncertainty. The current state of affairs may make US companies reluctant to invest in Macau’s upgrades or new construction, which could impede the city’s aspirations to become a world-renowned resort destination.
Analysts also caution that Trump’s tariff strategy could harm American brands’ reputations abroad. Chinese regulators may designate American casino operators as tools of US geopolitical influence rather than as impartial companies.
