Why Foodies Flock to Vegas
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the new "Vegas" show based in the 1960's, savvy Savoy casino manager Vincent Savino pleads with his Chicago mobster boss for money for a fine restaurant in the casino. He points to one of his "whales" entertaining a pretty young thing at a fine eatery down the street arguing they need to keep whales in the casino 24/7 and they shouldn't have to walk more than a few feet from the gaming floor to eat a nice meal. Very prescient, Vinny.
According to latest trends food and beverages in Vegas are bringing in better numbers than the tables (gaming tables, that is.) For a long time Vegas was better known for bright lights and cheap buffets but now it's become a foodie destination. Some of the world's most famed and acclaimed chefs have decamped to Vegas for a taste of the action just like big name entertainers have done since the sixties'.
In one Vegas food writers' listing of his Vegas top 20 restaurants MGM Resorts (NYSE: MGM) has the #1 spot as well as an overall three of the top ten. Number one was famed chef Joel Robuchon's eponymous (how I've longed to use that word) L'Atelier de Joel Robuchon in The Mansion at the MGM Grand. This restaurant is mentioned by several other food writers as an experience and in particular, the "La Truffe" eight course truffle-centric dinner for $500 a pop. That's the kind of dinner that keeps the whales happy. MGM is also mentioned for Le Cirque at the Bellagio and American Fish restaurant at the Aria. The Buffet at Bellagio, an MGM property was also highly lauded. Those infamous buffets can still be had but you can eat haute cuisine buffets for a few dollars more.
Not to be outdone, Caesars Entertainment (NASDAQ: CZR) just announced on October 17 a premier foodie event, Food University Las Vegas, a three day event in December allowing aficionados of fine wine and food to cook and taste alongside James Beard Award winning chefs and wine and cheese experts at Caesars Palace. Price tag is $1995 per person, not including hotel (but Caesars will cut you a deal). The event will also take place at the same time as the opening of a new Gordon Ramsay gastropub at Caesars and to celebrate Wolfgang Puck's 20 years in Vegas. Caesars also has the number 2 spot on the top ten list with The Range at Harrah's Las Vegas.
No slouch, Las Vegas Sands (NYSE: LVS) has the number 4 spot with celebrity chef Mario Batali's Enoteca San Marco at the Venetian and another spot in the top ten with its Public House, also at the Venetian.
But which are the best Vegas stocks? Let's munch some numbers, I mean crunch. (Do read the reviews of some of these restaurants, the food sounds amazing.) MGM is reporting soon on October 31 and has a -1.23 EPS with a 5.22 billion market cap. In Vegas MGM owns The Bellagio, MGM Grand, Mandalay Bay, and The Mirage and has a 50% interest in the CityCenter which has the Aria. MGM also has a complicated 51% ownership of MGM China Holdings which just landed Macau's permission to build another MGM casino/resort on Cotai in addition to its MGM Macau casino property already up and running. Finally, it has some 15 properties in Nevada, Mississippi and Michigan and three more in the US with a 50% stake. In Maryland, a contentious ballot proposition, Question 7, will determine whether Penn National Gaming or MGM will be developing a major casino in Prince George's County or any casino at all.
While revenues at MGM China are up 6%, the Q2 earnings release revealed a drop in operating income from $3.68 billion to $175.4 million. The company has a lot of debt and a lot of ambitious projects in its pipeline that aren't going to be accretive for several years including the second Macau property (at least 3 years away from completion) and that possible Maryland casino at National Harbor (not approved yet). Long term debt is $13.37 billion and total cash is $1.87 billion. The short interest has been increasing to 6.80%.
Caesars numbers are even worse with a -7.25 EPS (the stock closed at $6.30 on October 23 and is just barely up from its 52 week low of $6.08). Caesars, formerly Harrah's, owns or operates 52 casinos in the United States, UK, Canada, Uruguay, Egypt, and South Africa as well as racetracks and the World Series of Poker franchise. After debuting just this February it still has a debt load of over $20 billion to cash of $985 million. This stock is only recommended for inveterate gamblers who think a return on equity of -87.69 and a negative profit margin of over 10% is something to trade for a dead cat bounce. Caesars reports on November 5.
Now Las Vegas Sands had been the go to gambling stock for some time. It is down 25% from its 52 week high of $62.09 but it has a P/E of 25.80 with a forward P/E of 16.53 and a 2.20% yield. Las Vegas Sands has been the biggest beneficiary of Asian gambling with its Sands Macao casino, The Venetian Macao Resort Hotel, the Sands Cotai Central, and the Four Seasons Hotel Macao in Macau and the Marina Bay Sands in Singapore. In Vegas it has The Venetian, The Palazzo, and the Sands Expo Convention Center and Sands Bethlehem in Pennsylvania. Since CEO Sheldon Adelson has ponied up millions for the Republican party so if Romney loses, there'll be selling off shares. Las Vegas Sands reports October 29. Adelson, his wife, and trusts in the Adelson name own over 194 million shares. Las Vegas Sands has good institutional support with names like T. Rowe Price holding over $1 billion worth of shares. He's going to need it for his dream casino in Spain for which he's already lining up financing.
I just got an email today advertising a Winter's Coming $129 a night special at your choice of The Palazzo or The Venetian. I wouldn't mind a few good meals at The Venetian paid for with some Las Vegas Sands stock profits, would you? It's the best bet in Vegas or Asia.
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