Las Vegas Sands vs. Wynn Resorts

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.

I like both companies enough to have an outperform pick on both stocks in CAPS, which can be seen here. I'm also considering buying shares of Wynn Resorts in the near future, FYI.

Keep up on gaming stocks with My Watchlist and our free email My Fool Daily. With My Watchlist and My Fool Daily, our foolish analysis of the stocks you pick comes straight to you. No searching through articles you don't want. What could be easier?

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

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Read/Post Comments (11) | Recommend This Article (3)

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 February 15, 2012, at 4:58 PM, cp757 wrote:

    Travis Travis Travis this is what I am talking about you just don't get it .Let me put it in little words so you can understand.You said:"Wynn, on the other hand, could potentially double its own EBITDA when it opens its planned resort on Cotai" ,Let me bring you up to speed that means no added revenue in Macau from Wynn for five years. The old Macau is losing Market share to the new Macau at Cotai Central . That's where the gamblers are going. I hope that was not to technical.The future growth of WYNN is going down because the old Macau is moving to the new Macau and Wynn is not there. As we saw the old Vegas torn down and a new Vegas built upCotai Central will become the new center.When Wynn gets his casino built he will still be off the strip.Not a good spot and five years away. If your advice is to invest in WYNN and hold on until WYNN "doubles its own EBITDA "in five years, I guess that is what investors will take away from your article. I notice you have held on to WYNN in your portfolio. You put it in on 10/05/11 @ $112.67 . and held it all the way up to $139.73 and back down to below your entry point.This is something investors do all the time. They fall in love with a stock and don't realize when the fundamentals have changed. I am sure you do your research on different stocks and feel you know what is happening in the market. It is a kind of arrogance that makes our decisions clouded . You are an expert in the gaming stocks and this still happened to you. What about the investors that are looking for Ideas about stock investments going forward. You know you should have sold WYNN when they did not get approval for a casino at the Cotai Central location. This Iconic area in Macao is a world changing gambling destination . You have LVS in your portfolio so you are up on that stock big time. Talking about the changes in the sector would have helped so many investors sell WYNN at $139.73 and look at the other stocks in the sector.This is my point about writing about the big picture. Just the numbers is what you seem to want to do but this will keep you in a stock to long unless you dig deeper for the whole story .I guess your decision now is do you sell at a loss or do you hold on for another run up in the stock? What is the thesis that will make you keep the stock ? Increasing revenue ? New casinos opening? What would make you sell the stock ? SEC investigation ? Lawsuit ? These are the questions your readers are asking themselves . You are a Motley Fool Analyst and a gaming stock specialist.

    You said :

    "Half of my active CAPS picks are underwater because when I get a nice positive score I end the pick. CAPS has a game element to it and that's part of the game. Like I said 77% of my picks beat the market"

    "I'm not going to get 100% of my picks right, but my track record in gaming stocks speaks for itself. "

    Travis Hoium

    I decided to look at your picks for the guidance the Fool community rely's on. I just want to know what you think.

  • Report this Comment On February 15, 2012, at 5:11 PM, termin8r03 wrote:

    Las Vegas Sands just implemented a dividend of about 2% at today's prices.

  • Report this Comment On February 15, 2012, at 6:11 PM, cp757 wrote:

    Travis knows about the 2% dividend with Las Vegas Sands . He knows all the same information I have stated .It is his choice to pump Wynn nothing more. Travis is blind to the problem and will keep slamming LVS until it gets to 60? 70? 80?.When will you tell everyone LVS is better than WYNN?The Fool Community wants to know.

  • Report this Comment On February 15, 2012, at 10:07 PM, onninn2 wrote:

    Travis do you know that no one has recieved a land grant to build on Cotai? LVS is the only one that actually owns land (lot 3) right now. They have submitted plans for construction and will build as soon as approved. I would bet Melco gets the okay first so they can finish up Studio City. It would not make sense to let someone start something new before they finish something under construction, with the labor limits and such. So just for giggles best case is WYNN opens in 2016 worst case is they approve LVS for lot 3 and then WYNN sits for ?? The labor limits and SAR dragging their feet seems to be the way they control growth. So to invest ( bet ) on the assumption that WYNN gets a land grant and plans approved and opened by 2016 seems like a much riskier gamble than a for sure lot 5 and 6 opening and a already OWNED lot 3

  • Report this Comment On February 16, 2012, at 11:32 AM, TMFFlushDraw wrote:

    @cp757

    I'm not sure what about my article was "slamming LVS"? I just said that I thought WYNN was a better buy right now.

    CAPS isn't built for trading so WYNN may have gone up and down in the time I have had an outperform rating on it. My call is for 5 years in My CAPS, I'm not calling any short-term bottoms. I'm not making predictions on what's going to happen today, tomorrow, or next quarter. This is a call that the long-term valuation of WYNN is better than LVS right now, by a small margin.

    @onninn2

    You're right that there is uncertainty for WYNN, MPEL, and MGM in Cotai expansion. I'm under the assumption that Steve Wynn knows what he's doing in beginning pre-construction work already. Whether Lot 3 or Studio City gets approved first is anyone's guess. Studio City is still held up on table games right now.

    Travis

  • Report this Comment On February 16, 2012, at 1:03 PM, cp757 wrote:

    Travis I notice in your portfolio you bet heavy on solar stocks both up and down but they have not done what you thought they where going to do(TSL) is down 84%. You have held on to some for almost a year .

    You say that

    :"Half of my active CAPS picks are underwater because when I get a nice positive score I end the pick. CAPS has a game element to it and that's part of the game. Like I said 77% of my picks beat the market"

    What thesis are you working on that makes you feel these losing stocks are going to do well? I want to understand how you would trade if you had 100,000 dollars in the game. Would the ax be on your neck if you where losing your money? Would you feel the effect of the information you provide ? You could give opinions that make a difference. If you said I made a mistake on my opinion and I have decided to end my position on that stock, even if you lost, we would understand. The reader can learn more sometimes from your challenges in the market than they can from the calls you got right.We know you cant have a position in the stocks you cover but that's all the more reason to have responsible articles. I think the truth is you can't end your losing positions because it will effect your score.Out of 46 positions you have 24 that are losing,some as high as 84%.If you closed those positions would that effect your score? Is your real score lower than 77?Who knows its just a game right.What you say to people, they take as fact . Just like you did not know who was first to Macau between Wynn and Las Vegas Sands right Las Vegas Sands was first not Wynn.Just a mistake, Oh yes you did mention Wynn had a dividend you just forgot about Las Vegas Sands had a Dividend.Just slipped your mind.Why point out anything about the future . Travis said:

    " My call is for 5 years in My CAPS, I'm not calling any short-term bottoms. I'm not making predictions on what's going to happen today, tomorrow, or next quarter. This is a call that the long-term valuation of WYNN is better than LVS right now, by a small margin".

    I get you want to pump a stock that is not doing what you thought it would but come on, this is getting to be a little to biased

  • Report this Comment On February 16, 2012, at 3:20 PM, Pkylie wrote:

    Travis, Travis, Shame on you. Keep pumping LVS.

    Where is LVS gonna get 540 tables to open Cotai central ? There are only about 200 tables left out of the gaming table cap for 2013 .

    If LVS is planning to move tables from Venetian,4 Season and Sands Macau to Cotai Central, that amounts to robbing one to pay another .

    Don't quit your day job anytime soon.

  • Report this Comment On February 16, 2012, at 6:51 PM, snoppydo122 wrote:

    So basically you will buy Wynn instead of LVS because they might open a new casino in 5 years? Yet LVS is opening a new casino in 5 weeks and now pays a dividend as well? Come on dude! From a fundamental perspective I think I will take LVS now and revisit Wynn down the road.

  • Report this Comment On February 17, 2012, at 2:30 PM, TMFFlushDraw wrote:

    @snoppydo122

    I accounted for the new casino in my fundamental analysis. So it's already built into the stock price.

    Travis Hoium

  • Report this Comment On February 17, 2012, at 10:25 PM, cp757 wrote:

    Travis you say your fundamental analysis has the new casino already built into the stock price. At what multiple. CZR is selling for 12.56 what multiple would you give that. Do you think it is worth 12.56 ? If you look at all the new rooms coming up in the next 36 months you get LVS 13289 WYNN 600. If you look at the tables you get LVS 1012 Wynn 212 . If you look at the slots you get LVS 3848 WYNN 375 . I think investors would like to know this.You say every thing is priced in to the price of LVS. I dont agree. Do you think every thing is priced in to WYNN?Forbes said:

    The bearish cross recently completed by these two trendlines confirms WYNN’s deteriorating price trend.

    As WYNN’s intermediate-term decline deepens, a change of heart among the lingering brokerage bulls could unleash additional selling pressure on the shares. Traders anticipating additional downside for WYNN may want to consider the stock’s June 130 put.

    If they come out with a downgrade on the stock how far would it fall.What about the Lawsuit Between Wynn and Okada? Could this cause the stock to drop. What do you see that makes you want to recommend WYNN?

    We will see what side of the trade you should have taken but you still have LVS as a win , so its all good.

  • Report this Comment On February 18, 2012, at 9:04 PM, cp757 wrote:

    Citigroup analyst says “make no mistake, he is the market in Macau”. Almost all of the 28% of room supply in Macau over the next 13 months will come from Adelson. Sands China’s owner conjured up the dream of a Vegas-like Cotai strip and has almost single-handedly transformed Cotai into the world’s premier gaming mecca. “The centre of gravity in Macau has moved to Cotai,” says Chan. “There are casinos all over Macau, but Cotai is where most of the action is now, and that will be reaffirmed when Cotai Central opens in a few weeks.”

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