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Investing.com - Morgan Stanley (NYSE:MS) has upgraded Wynn Macau Ltd. (HK:1128) (OTC:WYNMF) from Equalweight to Overweight while raising its price target to HK$7.80 from HK$7.10, representing a 27% upside potential.
The upgrade follows Morgan Stanley’s reassessment of Wynn Macau’s non-gaming capital expenditure estimates for fiscal year 2026. The investment bank has revised its approach, now spreading the remaining committed capital expenditure of approximately US$1.9 billion over six years, resulting in annual non-gaming capital expenditure of HK$1.8 billion.
This methodological change has increased Morgan Stanley’s free cash flow assumptions for the casino operator, directly contributing to the higher price target. The firm also made minor adjustments of 1-2% to its EBITDA and EPS estimates for fiscal year 2025 after incorporating actual second-quarter results.
Morgan Stanley noted that Wynn Macau is the first company in its coverage universe to issue bonds expiring in 2034, which extends beyond the current gaming concession period ending in 2032, suggesting "growing confidence in the perpetual nature of the business."
The investment bank highlighted that Wynn Macau stock is currently trading at 8.6 times EV/EBITDA and offers a 10.9% free cash flow to equity yield based on 2026 estimates, which it considers cheaper than the company’s 15-year average.
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