Morgan Stanley believes that a Democrat victory in the US could lead to a more favourable relationship with Chinese authorities.
Macau.- Morgan Stanley has upgraded American operator Wynn resorts, citing a post-pandemic uptick, “overblown” concerns about Macau’s high end, and a possible improvement in US-China relations if Biden wins the US elections.
It has raised Wynn’s rating from “equal-weight” to “overweight” and lifted its price target from US$90 to US$95.
It said: “We upgrade Wynn as we see 1) an upcoming operating inflection with further upside post-Covid, 2) overblown concerns about Macau high-end, & 3) a positive catalyst if Biden wins, all at an attractive valuation.”
The bank believes that a potential victory for the Democratic candidate, Joe Biden, could lead to an easing of tensions between the American government and Chinese authorities, favouring Wynn’s operation in the Macau SAR.
Morgan Stanley said a Biden administration “will likely take a softer tone toward geopolitical relations with the world’s second-largest economy.”
There have been concerns that American operators could receive less favourable treatment in Macau’s next licence tender, which is set to take place in 2022.
Morgan Stanley analyst Thomas Allen said: “We would expect to see Wynn stock re-rate if Biden wins the presidency.”
Three-quarters of Wynn Resorts’ EBITDA comes from its Macau operation. The operator’s share prices are down by almost 48 per cent year this year to date.