It’s Macau Time Baby!
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wynn Resorts (NASDAQ: WYNN), with its established leading position in Macau and Las Vegas is further increasing its presence in Macau by opening another resort in Cotai by 2016, further strengthening its strong foothold in the region. For Wynn Resorts, Macau contributes 3x earnings to that of Las Vegas, as in 2011 this region posted $33.6 billion in revenue from gaming. Moreover, the continuous increase in the numbers of Chinese HNIs (High net worth individuals) will boost Wynn's robust growth.
Wynn is placed in the prominent list of companies which pay special dividends. The company has a history of returning value to shareholders and its strong balance sheet allows it to pay special dividends. Continuing with this gesture, the company paid a special dividend of $8 per share on Nov. 20, four times more than last year and further announced to double its quarterly dividend to $1 per share beginning next year. It is to be noted here that this same strategy has also been adopted by its close rival Las Vegas Sands. Let’s see what these companies have in their kitties-
Las Vegas Sands (NYSE: LVS) has announced that it will pay $2.75/share special dividend on Dec 10, and also raised its normal dividend to $1.40 a share, a hefty 40% increase over last year. The company has recently opened its Sands Cotai Central resort in April that will benefit from the increasing earning power from Asians. Further, the company is also in talks with the Government of Spain for new casino openings.
MGM Resorts International (NYSE: MGM): Another Casino resort that is a dominant player in Las Vegas is MGM. But, this time, its 3Q12 revenue rose by 2% mainly because of its revenue growth in Macau. Now, the company is planning to open its new resort in Cotai. It has already signed a concessional land contract with the government and moreover it is expecting to soon receive its online gaming license which will take it a step further in the online gaming market.
Coming back to Wynn, the two bright spots for it in the future are being discussed below which will give the company good geographical expansion resulting in increased financials.
Wynn's Cotai Plan: Just as Macau is growing with the regular indulgence by HNI's it is expected that Wynn's resort on Cotai will also grow in the same vein. The project is expected to cost the company $2 billion to $3 billion. This new resort will have 40% more rooms (about 2000), two times more tables (about 500) and 1300 slots which will double Wynn's revenue giving it an enormous growth opportunity. Macau is basically known for providing world class gaming infrastructure. Wynn has several premium brand customers and it also provides premium class services which helps in retaining its customers while its reputation will help it to attract new customers. Moreover, the Macau government has taken an initiative to impress the visitors by increasing the government’s investment in transportation means which will ease the travelling and commuting woes for the Chinese visitors.
Eye on Philadelphia: Wynn has once again submitted its proposal to build a casino in Philadelphia which is its second attempt in this regard and is quite hopeful of getting the approval from the officials. The company is planning a 1,500,000 sq. foot casino with 100 tables where as its hotel plans include adding 300 rooms that will all be above the average standards. If the plan gets approval, it will cost Wynn about $500 million and moreover it will not be facing any competition as this would be the last license in Philadelphia. It is expected that the company would take a lead over the existing casino Sugarhouse. Five other firms has also submitted their proposals but chances are that Wynn will win as it finances and international expansions are quite strong which makes it more favorite over others.
To conclude, I see a huge growth potential in these three resorts which intend to grab their market share in China which is less impacted by recession. Macau will be the main vibrant region in the coming years where visitation continuously improves. Wynn stock rose 8% as it benefitted from its strong strength in Macau. The company holds a strong balance sheet as in last seven years it has returned $4.6 billion capital to its shareholders and it is expected to generate $500 million to $600 million in 2013.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!