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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.