How Overseas Gambling Will Continue to Grow Beyond 2014

This major casino operator has had an enjoyable run, but there is more in store.

Jan 14, 2014 at 7:02PM

Wynn (NASDAQ:WYNN) appears to be one of the best investments in the casino space. That's not because of its great Las Vegas presence, but rather it's because of Wynn's position overseas. Macau, the gaming capital of the world, has been a growth machine for Wynn and the other major casino operators who had the foresight to invest there. Now, the real story for Wynn is the Cotai Strip. This area of Macau is expected to see growth like what the Macau region has become known for over the last half decade.

Over 70% of Wynn's revenue comes from Macau. This comes as the company owns over 70% of Wynn Macau, Limited. Wynn Macau operates two luxury casino hotels in Macau. Wynn is currently building a casino on the Cotai Strip that is expected to cost $4 billion. The casino is expected to come online in 2016. 

Macau's still firing on all cylinders
Macau remains the only place in China where gambling is legalized. As a result, millions of Chinese residents and tourists enter the region every year. Casinos in the area have already been seeing positive results in 2014. Analysts note that revenue in just the first week of the year was up over 5.5% year-over-year. 

Another thing with big potential to help drive more traffic to Macau is the almost $10 billion bridge that's being built to connect Macau and Hong Kong. This will open just in time for Wynn's Cotai Strip casino opening in 2016. The bridge will cut the commute between the two from four hours to forty-five minutes. 

Why Wynn is the best bet
Wynn has proved resilient as it has grown revenue every year for the last eight years. The other big positive for Wynn is a rebound in the U.S. economy, which should bring more traffic to Las Vegas. Wynn has a solid position in Vegas, with two major hotels/casinos.

Las Vegas Sands (NYSE:LVS) is one of Wynn's biggest competitors, with a couple of Vegas casinos and a number of Macau locations. Also, Las Vegas Sands has locations in Singapore and Pennsylvania. Speaking of markets outside of Vegas and Macau, Wynn is looking to break into higher-end U.S. markets where room rates are higher. A couple of potential targets could be Boston or Florida.

Melco Crown Entertainment (NASDAQ:MPEL) has been one of Macau's biggest success stories, and shares have risen over 135% in the last twelve months as a result. Melco has been one of the most successful casino operators because it's the most levered to Macau. Melco also has a less-levered balance sheet than Wynn and Las Vegas Sands. Analysts still expect Melco to be one of the best casino stocks in terms of earnings growth, with EPS projected to grow at an annualized 41% rate over the next five years.

Wynn pays a near-2% dividend yield. Meanwhile, Melco doesn't pay a dividend and Las Vegas Sands yields 1.7%. However, one of the most beautiful things about Wynn is its special dividends. At the end of 2011 Wynn paid out $5 per share in special dividends and in 2012 it paid out $7.50.

Bottom line
Wynn appears to be a very solid pick in the casino industry. It's a great play on Vegas and the "new" Vegas, Macau. It also happens to be cheaper than Las Vegas Sands and Melco on an enterprise value-to-earnings before interest, taxes and depreciation basis and an enterprise-to-sales basis, and it pays the highest dividend yield. No analysts have a sell rating on the stock, and 16 of the 25 analysts following the stock have a buy rating. Buy Wynn for more upside in the near term.

Looking for more growth opportunities? 
They said it couldn’t be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he’s ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen 6 picks for ultimate growth instantly, because he’s making this premium report free for you today. Click here now for access.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers