Wynn Gets License to Gamble on Cotai

Yesterday, Wynn Resorts (Nasdaq: WYNN  ) got news it has been waiting two years for: It was granted a formal land transfer for its resort and casino on Cotai, joining Las Vegas Sands (NYSE: LVS  ) , Galaxy, and Melco Crown (Nasdaq: MPEL  ) in operating a resort there. MGM Resorts (NYSE: MGM  ) hopes to soon join the fray with a resort across the street from Wynn.

The opportunity for Wynn is incredible. Las Vegas Sands generated quarterly EBITDA of $281.9 million at The Venetian Macau in the fourth quarter, and City of Dreams generated $186.6 million of property EBITDA. Wynn has a tendency to outperform in its casinos, generating an incredible $313.1 million of EBITDA in the fourth quarter in Macau despite not having a property on Cotai.

The site is 51 acres and is planned to include a 2,000-room hotel with convention space, shops, entertainment, and restaurants. Wynn made a deposit of $62.6 million for the land in December and will make eight more payments of $16.4 million. A $2.5 billion project budget has been floated, but that and design changes are said to be up in the air right now.

A big win for Wynn
This isn't a surprising approval and the market yawned over it for the last two days. But it is extremely important to the company's future. It's not out of the realm of possibility that the resort could double Wynn's EBITDA when it opens in 2015 or 2016. By then the Macau market will be ready for more supply and the infrastructure within Cotai and between Macau and Cotai will be able to welcome the resort with open arms.

We'll have to wait for final details and designs from Wynn, but I think this makes Wynn one of the most attractive companies in gaming right now. The impact of this one casino on Wynn is greater than Sands Cotai Central will have on Las Vegas Sands, just by virtue of their comparative market caps.

Interested in reading more about Wynn Resorts? Click here to add it to My Watchlist, which will find all of our Foolish analysis on this stock.

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 (3) | Recommend This Article (3)

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  • Report this Comment On May 04, 2012, at 9:19 PM, cp757 wrote:

    Travis you are so funny. You love WYNN so much and you spin your story any way you can to make them look good. You said "The impact of this one casino on Wynn is greater than Sands Cotai Central will have on Las Vegas Sands, just by virtue of their comparative market caps. Have you stopped to consider how much LVS will take in from now until 2016 or 2017 on Cotai Central ? Steve Wynn will not be paying big dividends until 2016 if then. You want to brush Okada under the rug and spin your story in a positive way. I get that but come down to earth. You say the "market yawned at the Cotai approval" would that be the slide in the stock price from 137 down 10 dollars to 127. When Steve Wynn finishes this project he will be off the main strip away from all the action behind City of Dreams with 2000 rooms. Las Vegas Sands could have 3,600 rooms on the strip, added from lot 3 before WYNN makes one dollar. What are the investors going to look at from quarter to quarter. They will have 20 to 24 quarterly conference call's that they will hear about the Okada lawsuits, construction costs, loans, and why the dividend will not be as big as it was in the past. You can keep talking about WYNN in glowing terms and putting down Las Vegas Sands but Steve Wynn is the one that told Adelson that Cotai Central was " the stupidest idea I have ever heard in my life". I guess he changed his mind. Adelson said Steve would cut up his arms to do the deal now. Tell your readers how he will add a billion dollars to revenue in 2012 . He won't. Tell them how he will add a billion dollars in 2013. He won't. You see a pattern here. Dead money until 2016 or 2017. If you take the 1.07 billion in adjusted property EBITDA that LVS made in the first quarter times 4 you get 4.28 billion and that's on the low side. They will do far more than that and the market knows that. I said that you would be hard on Las Vegas Sands when you dropped them from your portfolio but I didn't know you would be so obvious.

  • Report this Comment On May 07, 2012, at 10:41 AM, MutualFundMonday wrote:

    "This isn't a surprising approval and the market yawned over it for the last two days."

    I guess you missed the part where the stock ran to 135 on the rumor of the approval.

    "It's not out of the realm of possibility that the resort could double Wynn's EBITDA when it opens in 2015 or 2016."

    Did you even bother to understand that WYNN can't even break ground until a development plan is approved (they only got a land concession and now they have to submit a development plan) which puts an opening at 2016 at best.

    And you also have no understanding of WYNN's business model. VIP! Is the amount of VIPs in China growing as fast as mass market? Are the VIPs that play at Wynn Macau on the Peninsula just going to be happy playing there or will they rather play at Wynn's new casino on Cotai? Hmmmmmm.

  • Report this Comment On May 07, 2012, at 4:34 PM, cp757 wrote:

    Travis is now the time to buy your recomendation on WYNN. Can you tell me what a good entry price would be. You are the man. You know this sector so well, what should the market cap of WYNN be. It finished at 125.21 is that a good price to buy the stock in the morning ? You said "The opportunity for Wynn is incredible." Incredible for lower revenue? Incredible for lower profits ? Incredible for filing lawsuits ? Incredible for waiting for approval of the submited development plan's? You would never tell anyone to sell WYNN and you would never drop it from your portfolio so I guess we need to buy the stock in the morning. What price ? Hummm.

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