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General Investing

Las Vegas Sands (LVS), Wynn Resorts (WYNN) and MGM Resorts (MGM) Reap Rewards from Macau Exposure

December 11, 2012

Las Vegas Sands (LVS), Wynn Resorts (WYNN) and MGM Resorts (MGM) provide opportunities for investors looking to participate in Macau gaming, says Harry C. Curtis, Managing Director and Senior Analyst at Nomura Securities International, Inc. He says he expects growth the Macau market to grow in 2013 with increased profit margins.

“Notably, the gaming volumes and growth have continued to be very strong in the mass segment, and the mass segment is important because it’s got a 35% margin as opposed to 12% margin for the VIP business. But the VIP business has been stuck in neutral. Our sense in 2013 is that there should be mid-single digit growth in the VIP segment as the Chinese economy reaccelerates, and that the mass segment will continue to grow at about 20%,” Curtis said.

Curtis says his favorite stock is Las Vegas Sands. “That’s mainly an Asian gambling company, generating 75% or 80% of its EBITDA between Singapore and Macau. They just raised their dividend and they’re generating $2 billion to $2.5 billion of free cash flow annually, over and above their maintenance capex and dividend requirement. They could return even more capital to shareholders if they wanted to,” he said.

“We also like Wynn, which is a free cash flow story. The stock’s yielding nearly 4%. And at some point, investors are going to begin giving them credit for a new casino under construction in Macau,” he said.

Curtis also likes MGM, which has exposure to the Macau gaming story. “At around $9.50 a share, it’s really not getting any credit for the value of its cash flows in Macau. All of the value ascribed to the equity is found in Macau, and there is really no value investors are according it in the U.S.,” he said.


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