Macau Continues to Amaze

Gambling dollars flowing into Macau casinos are nothing new, but this year may shock even the most bullish followers of gaming stocks. This year, one analyst upped its forecast of Macau's gaming take to 30% growth over last year. It isn't too late to upgrade that number again, considering the latest news.

In March, Macau casinos took in more than 20 billion Macanese patacas, or $2.5 billion. That's the first time the gambling haven has passed that milestone, and it's an incredible 48% growth over last year. January gaming grew 33.2%, and February rose 47.7%, so the growth momentum is only getting stronger.

The news has sent Las Vegas Sands (NYSE: LVS  ) and Wynn Resorts (Nasdaq: WYNN  ) higher today by 4% and 6%, respectively. Ironically, the only pure Macau play, Melco Crown (Nasdaq: MPEL  ) , is only even with the gains of MGM Resorts (NYSE: MGM  ) , which has just a small presence in Macau. No one ever said daily market moves make total sense.

The gaming comparisons in Macau get tougher as the year goes on, but gaming take for March was already 6.4% higher than 2010's best month. I can't imagine anything but growth unless a freak natural disaster hits the center of the Cotai Strip. If that's the biggest risk going forward, I'll take it.

This is good news for at least one gaming company that's had a bumpy ride lately. Las Vegas Sands investors are shrugging off the company's legal troubles after CEO and major shareholder Sheldon Adelson said about the investigation, "When the smoke clears, I am 1,000 percent positive that there won't be any fire below it." Adelson has never been known as a model of humility, but his words have to ease a bit of concern for shareholders.

Know when to hold 'em
Considering the growth that Macau has demonstrated year after year, I see no reason to be anything but bullish on casino operators there. There will be ebbs and flows as rivals steal customers from each other, but to use an old cliche, the rising tide will lift all boats.

Interested in reading more about casinos? Click here to add all four Macau operators to My Watchlist, which will find all of our Foolish analysis on those stocks.

Fool contributor Travis Hoium is long Melco Crown. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Melco Crown Entertainment is a Motley Fool Global Gains selection. 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.


Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 01, 2011, at 4:24 PM, zeroin wrote:

    The LVS presence, growth, and enormous success in Singapore must not be overlooked as well.

  • Report this Comment On April 01, 2011, at 10:10 PM, mrkrazyk wrote:

    You complete idiots at the Motley Fool are by far the dumbest stock experts on earth, your only one step ahead of the other Moron, Jim Cramer wko continues to help millions of stupid people to lose their money.

    The Motley Fool told people for a year NOT to buy LVS because they were deep in debt and probably going Bankrupt. Now that LVS is in great shape and making money, you get on the band wagon. Why don't you just keep telling people about your "Great Call" on Walmart which was 30 years ago.

  • Report this Comment On April 02, 2011, at 2:28 AM, Tuxster12345 wrote:

    Surely, you aren't being a kickback for pumping this stock, no? Motley Fool prides itself on telling its fan to follow the cash always and that "cash is king" and that cash if the lifeblood of any company.

    So, why are you pushing Las Vagas Sands (LVS)?

    A cursory glance at some of the company's cash metrics tell the tale.

    Over the trailing 12 months the company reported $0.42 earnings per share. However, when you count the CASH -- using Buffet's version of free cash flow (i.e., "owner earnings") -- over the same period, the company LOST $0.88 per share.

    So, which is it?

    Is there a cash profit or not?

    At least for the past 12 months, the answer is clearly no.

    Also, calculating the company's "burn rate" tells me the company will run out of cash (i.e., working capital) in a little less than 2 years. And, please, don't even get me started on the company's debt load.

    Las Vegas Sands is certainly a no-can-do kind of company for me.

  • Report this Comment On April 03, 2011, at 2:00 PM, MegaEurope wrote:

    "When the smoke clears, I am 1,000 percent positive that there won't be any fire below it."

    With statistics like that, I'm glad he's not the CFO.

  • Report this Comment On April 03, 2011, at 11:22 PM, TMFFlushDraw wrote:

    @mrkrazyk

    Well I've only been writing for TMF since July so I wasn't around back then and I can't speak for what other writers had to say about the stock.

    I can say that I was long the stock at the bottom and when I started writing for TMF. I also made a lot of money riding it higher so you can take that for what it's worth.

    I am no longer long LVS but as you can see in the disclosure I am long MPEL so that's me putting my money where my writing is.

    @Tuxster12345

    Look at the growth of operating cash flows not just free cash flow. LVS has been putting billions of dollars into building new casinos so that's why the FCF numbers look bad. That new construction is nearly complete and is now generating cash instead of burning it. EPS and FCF are only headed higher.

    Travis Hoium

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