Wynn Unveils a Massive Budget for Cotai Resort

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The next resort on Cotai in Macau is in early stages of construction, and we still don't know what it's going to look like. Unlike Sheldon Adelson of Las Vegas Sands (NYSE: LVS  ) , who laid out his vision for his Cotai resorts years before they were built, Steve Wynn prefers to keep things a secret.

Finally, yesterday we at least got a budget for Wynn Resorts' (Nasdaq: WYNN  ) Macau resort on Cotai, a whopping $4 billion. The figure exceeds previous estimates of $2.5 billion to $3 billion, but Wynn says the added cost is because the project got slightly bigger.

The resort will have 2,000 hotel rooms, 500 gaming tables, 10 restaurants, and all of the other amenities we've come to expect from a megaresort.

Bad timing
The timing of Wynn's announcement could have been better, coming just days after Macau announced the slowest growth we've seen in years. Gaming revenue grew just 7.3% in May, and investors are freaking out that our days of growth may be over.

Don't think we haven't warned that this would happen. I've been saying for months that easy comparisons with early 2011 have made growth look more fantastic than it actually is. The reality is that gaming revenue in Macau has stagnated and is now tracking relatively flat month to month.

Time to buy
The good news is that falling stock prices make gaming stocks more attractive as multiples come down to earth. Melco Crown (Nasdaq: MPEL  ) has an enterprise value that is now trading at just 7.8 times EBITDA, and Las Vegas Sands has an 8.5 multiple when projecting Sands Cotai Central. Compare that with MGM Resorts (NYSE: MGM  ) and Caesars Entertainment (Nasdaq: CZR  ) , which both have multiples in excess of 10, and you can see why I think now is the time to buy gaming stocks with exposure to Macau.

Macau is seeing growth slow, but when compared with Las Vegas or Atlantic City, the choice is easy. Macau still has bright days ahead.

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

Fool contributor Travis Hoium manages an account that owns shares of Wynn Resorts and Melco Crown. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On June 07, 2012, at 1:49 AM, cp757 wrote:

    If Steve Wynn can open in Cotai Central in 2017 he will add 2000 rooms and have 9.5 billion dollars in debt. Nothing to add to the bottom line until then but lawsuits and higher expenses.

    By 2017 LVS will have 12,968 rooms plus over 10 billion in free cash flow with more than $9.0 Billion of Capital Investment paid off in Macau.

    Wynns X shaped new casino is off in the corner of the island facing away from the strip and does not hold up to Sands Cotai Central's 12,968 rooms and over 6,000 card tables. This is going to be a 60 billion dollar market by the time Wynn opens his new casino but Las Vegas Sands will be the only investment to have because they will have made 20 billion dollars by the time Wynn opens.

  • Report this Comment On June 07, 2012, at 12:01 PM, spokanimal wrote:

    Steve Wynn cracks me up.

    For almost 2 years before he got approval to build on Cotai, he was constantly telling the press that approval was "imminent".

    Yeah, right.

    Now, he's talking about a cotai resort with 500 gaming tables... or more than 9% of the tables currently active in Macau...

    ... yeah, right... just one little problem named Francis Tam:

    ... and a couple other resorts that'll be opening up ahead of Mr. Wynn... I guess without gaming tables according to Mr. Wynn's playbook.

    Wynn's eyes have been bigger than his stomach ever since he lost control of Mirage Resorts to MGM... Just ask Mr. Okada about it.


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