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.
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.
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