Wynn Outlines Growth Prospects

Shares of Wynn Resorts (Nasdaq: WYNN  ) have been on a tear recently, due to speculation about the company's upcoming growth plans. Last week, the company outlined a potential resort and casino near the New England Patriots' home in Foxboro, Mass., and for a second we thought the company made another step forward in expanding in Macau.

Football : Gambling :: Apple pie : America
Wynn is betting that a partnership with Robert Kraft and a location across from his football stadium will convince Foxboro residents that he should be allowed to build a resort there. The CEO sent a brochure and 20-minute DVD to residents with renderings and details about the project. Right now, it's slated to be a $1 billion development with 5,000 parking spots and convention facilities. It could bring up to $15 million in new revenue for the community.

This is another example of expanding gaming throughout the U.S., something that largely hasn't helped gaming as a whole. Foxwoods and Mohegan Sun, which attract Massachusetts customers, are already worried about new competition after business fell off during the recession. In a relatively small area we have Las Vegas Sands' (NYSE: LVS  ) Pennsylvania casino, Atlantic City, tribal casinos, and a slew of racetracks in the northeast. Recent earnings reports from Caesars Entertainment (Nasdaq: CZR  ) , Boyd Gaming, and Penn National show that fighting for regional casinos isn't as profitable as it once was.

An expansion into Massachusetts might be a profitable move for Wynn Resorts, but Las Vegas Sands has proven in Pennsylvania that it isn't like the other opportunity in Macau.

Cotai on the mind
There was excitement in the market on Friday after it was announced that the company's land concession in Macau had been published in the official gazette of Macau. But soon after, the company retracted the disclosure, saying it was published by accident by the company's agent.

Even if it was a mistake, we can read between the lines and assume a land concession deal is likely coming in the near future. Wynn has been waiting on the Macau government to start construction in earnest, and with Sands Cotai Central opening in about a month, the timing seems about right.

Macau update
In February, Macau gaming revenue rose 22.3% from a year ago to $3.04 billion. This is a decline of 3% from a month earlier, although February is a shorter month.

The growth looks very strong year over year, but revenue has been trading in a consistent band since May of last year, so growth has definitely slowed. This could be due to a longer-term trend of slowing growth or some constrained supply in gaming.

Once Sands' Cotai Central opens, we will see if Macau gets another boost in revenue. The last spike in May coincided with Galaxy Macau's grand opening, and neighbors like Melco Crown (NYSE: MPEL  ) are hoping there's a bump to revenue instead of cannibalization of the market. MGM Resorts (NYSE: MGM  ) and Wynn are hoping to build new casinos in the area, and steady growth will help all resorts on Cotai.

Foolish bottom line
Potentially slowing growth in Macau isn't good for possible expansion, but these casinos wouldn't come online for years, so I'm still bullish on Wynn's potential expansion on Cotai. The release on Friday apparently shouldn't have gotten out, but I think it's safe to say that some news on the resort should come out in the coming weeks.

As for more expansion in the U.S., I'm wearier. Las Vegas Sands spent $800 million to expand into Pennsylvania and generated just $90.8 million in EBITDA during 2011. The payback in other parts of the world is much better, and I'm not yet convinced that Wynn's Foxboro project would be much better.

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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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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 March 05, 2012, at 4:56 PM, cp757 wrote:

    Travis I am surprised you have a crystal ball and can tell WYNN will get gazetted soon. You said "Even if it was a mistake, we can read between the lines and assume a land concession deal is likely coming in the near future." ? That is a stretch but lets pretend its the right call. We are still talking about a limited labor pool and an opening date of 2016 or longer.You said " Macau gaming revenue rose 22.3% from a year ago to $3.04 billion" and that's just a fact. My question is why is everyone assuming this is good for WYNN. I have found no writer that can tell me the break down of Market Share. What if WYNN has a lower market share ? This constant pump of WYNN is fine . Steve Wynn was a visionary but the money is in Macau and the question is how is that pie cut up. The partnership with Robert Kraft is a log cabin that will take years to get an approval and even more time to make it profitable , if it even gets built. I do think that Steve Wynn will get into Japan but he will have to wait 5 or 6 years for that, just as he will for Macau.Cotai Central is the center of the Gambling Universe with more revenue coming than any other country. Sheldon Adelson will take 30% to 40% of the revenue of Macau with Las Vegas Sands making it the biggest growth story in the sector.JMHO

  • Report this Comment On March 10, 2012, at 8:12 AM, cp757 wrote:

    This is the three year anniversary of the bottom of the stock market crash . Thirty six months for Las Vegas Sands share's to go from 1.38 cents a share to 54.83 dollars. That means if you had $13,800 dollars at the bottom of the crash on 03/09/2009 and you bought 10,000 shares you would now have $548,300 dollars on 03/09/2012. With 10,000 shares you would be paid $10,000 dollars on your dividend every year. That's a 72% return of the money you invested 36 months earlier, and that's just on the dividend, and over a 3,500% increase in your stock price. No other stock did that

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