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It's a question investors often ask themselves. Which company is better?
Today, I'm taking a look at Las Vegas Sands (NYSE: LVS ) and Wynn Resorts (Nasdaq: WYNN ) , two of the most successful gaming companies in the industry. Both have a presence in Las Vegas and Macau with their high end resorts there. The one big difference is that Las Vegas Sands has the additional advantage of a resort in Singapore.
Let the debate begin!
Location and growth
In Las Vegas, the two companies have casinos located across the street from each other. Both have suffered from lower demand after the recession, but unlike rivals MGM Resorts (NYSE: MGM ) and Caesars Entertainment (Nasdaq: CZR ) they have recovered nicely by focusing on the top end of the market. Also, unlike Caesars and MGM, Las Vegas Sands and Wynn are comparatively less leveraged. The two casinos generate about the same amount of property EBITDA so for comparison sake, we'll call them a wash.
In Macau, Las Vegas Sands dominates the landscape with a casino on the Macau Peninsula and a strangle hold on the Cotai Strip. The company is adding Sands Cotai Central to its two other hotels there; The Venetian Macau and Four Seasons Macau, giving it prime real estate in gaming's hotspot.
There are big differences in the two company's operations in Macau though. Wynn generates far more profit from much less space than Las Vegas Sands does at its resorts. In the most recent quarter, Las Vegas Sands generated $1.03 billion in casino revenue in Macau, driven by 1,129 table games. The Venetian Macau, for example, averaged $11,705 in table game win per unit per day.
Wynn Resorts squeezes much more out of its casino by focusing on high rollers at the very top end of the market. The company's Macau resort generated $889.5 million of casino revenue, mostly from an average of 487 tables. That's a per table win of $25,769 per day.
What will differentiate them in the future is growth in Macau. Las Vegas Sands is building Sands Cotai Central, which will have 5,800 rooms and 540 table games, bringing much more supply to the Cotai Strip. Wynn won't enter Cotai until probably 2016, when its casino next to MGM Resorts and Melco Crown's (Nasdaq: MPEL ) City of Dreams is expected to be finished.
In Singapore, Las Vegas Sands operates one of just two casinos there, and it's a doozy. Marina Bay Sands has generated $1.53 billion in EBITDA over the last 12 months and is approaching a $2 billion per year run rate.
Playing the odds
Now that we know where operations stand, it's time to talk about what you would be getting from an investment in each company. With their current stock prices, Wynn resorts has a $13.9 billion market cap and Las Vegas Sands is valued at $38.2 billion. So Las Vegas Sands might have more casinos and more EBITDA, but are you getting the same bang for your buck as Wynn Resorts?
To judge that we'll look at enterprise value divided by EBITDA. This will give us a multiple of how many times EBITDA you would be paying to buy the entire company at its current price. To calculate net debt, I have subtracted cash on hand from long-term debt.
|Company||Market Cap||Net Debt||EBITDA (ttm)||EV/EBITDA|
|Las Vegas Sands||$38.2 billion||$6.1 billion||$3.5 billion||12.6|
|Wynn Resorts||$13.9 billion||$1.9 billion||$1.6 billion||9.9|
By this form of valuation, Wynn Resorts looks much less expensive than Las Vegas Sands. But let's remember that Las Vegas Sands will open Sands Cotai Central over the next year, adding significantly to EBITDA.
Based on the development having twice as many rooms as The Venetian Macau, 5,800, and fewer table games, 540, I think it's safe to estimate that EBITDA will be similar to its neighboring resort, not considering possible dilution in the area. So if we add $1.0 billion to Las Vegas Sands' EBITDA, we would get a EV/EBITDA ratio of 9.8 if we included that resort.
This is just an estimation, but it does show that valuation is very similar when you consider soon-to-open resorts.
Foolish bottom line
The difference between the two companies really comes down to risk profile and size preference. By virtue of sheer size, it will be harder for Las Vegas Sands to grow in the future, even if it adds a wildly successful casino. Wynn, on the other hand, could potentially double its own EBITDA when it opens its planned resort on Cotai. By the same token, Las Vegas Sands has a more diverse assortment of properties and will cash in on the gaming boom in Singapore.
Right now, for my money, I think Wynn Resorts is a better pick because the company has proven to be a conservative operator with a history of consistent performance. It also pays about a 2% dividend and has a history of being a company focused on shareholder value.
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