Macau Ups the Ante

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We haven't even hit the Chinese New Year yet, and already Macau is looking to stay on its hot streak in 2011. CLSA Ltd. this week upgraded estimates for annual gambling revenue, which are now expected to grow 30%, up from the previous estimate of 20%.

As if we need more reasons to like Las Vegas Sands (NYSE: LVS  ) , Wynn Resorts (Nasdaq: WYNN  ) , and Melco Crown (Nasdaq: MPEL  ) , this gave investors reason to stay bullish on the stocks in 2011.

Tourism is driving the growth, with a 20.5% increase in visitors from mainland China and a 15% increase in overall arrivals in the first 11 months of 2010.

The success of Las Vegas Sands's Singapore casino, Marina Bay Sands, doesn't appear to be slowing down Macau's growth significantly. It may be taking some Asian customers outside of China who choose to visit Singapore over Macau, but this doesn't appear to be a big drain on business.

Slowing growth wouldn't be a bad thing
Growth in Macau might slow from a rapid 57.8% in 2010 to a more modest 30% in 2011, but casinos aren't being built as quickly as they once were, relative to gaming revenue. The "Big Three" and MGM Resorts (NYSE: MGM  ) are largely done building for now, so the extra gaming dollars will flow more quickly to the bottom line this year.

The exceptions are Las Vegas Sands's development on the Cotai Strip, which could open in late 2011, and the Galaxy Cotai, which will open this year. Those two casinos could make Cotai an even more attractive destination, leaving the Macau Peninsula in the dust, just like The Strip did to downtown Las Vegas.

An analyst's estimates should be taken with a grain of salt, but it is good to see increased confidence in Macau's gambling revenue in 2011. How much do you think Macau's gambling revenue will grow this year? Leave your thoughts in the comments section below.

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Fool contributor Travis Hoium does not have a position in any gambling stocks. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his Motley Fool CAPS picks at TMFFlushDraw.

Melco Crown Entertainment is a Motley Fool Global Gains selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 22, 2011, at 11:06 AM, BudSlattery wrote:

    With an additional 3-400,000,000 chinese expected to attain middle class status in the next several years Macau and Singapore gaming should benefit mightily.

    Melco Crown is my choice for upside potential. Majority owned by the powerful Ho and Packer families and the least leveraged.

  • Report this Comment On January 23, 2011, at 1:20 PM, JF125780 wrote:

    I have owned LVS since Sheldon Adelson took the company public 12/15/2004 at $45.00 a share. It was only a shell of what it is today.

    The only negative I can see is the fact that the insiders are taking free shares and then selling them at the high points of the market price, leaving the share price below what it would be, if more prudent judgement was exercised by the board.

    What's the purpose of this ? Are insiders depressing the stock purposely, so at a later date they can take the company private?

    Dan Kowkabany

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