As small as Macau is, it’s already turning in to a regional affair. The Cotai Strip is acting completely differently from the Macau Peninsula. & it’s having a huge impact on the fortunes of the gaming operators there.
Las Vegas Sands (NYSE: LVS ) reported earnings last week, & while Sands Cotai Central was the biggest addition to its revenue, the trends showed in that mass-market table play will be a long-term driver. Venetian Macau saw a 56.1% increase in mass-market volume & Four Seasons Macau was up 104.5%, compared with just a 14.8% increase at Sands Macau on the Macau Peninsula.
When Wynn Resorts (NASDAQ: WYNN ) reported earnings this morning, investors expected to see more of the same. Results generally held true to form, with VIP table game volume down 1.6% & mass market volume up 8.5% in the 2nd quarter. That’s a nice increase in the mass market yet isn’t anywhere near what Las Vegas NV Sands is doing on Cotai.
Overall, Wynn is pretty much holding steady in Macau until its new resort opens on Cotai in early 2016. Revenue was up 2.6% to $930.9 million, property EBITDA was down 4% to $290.1 million, & adjusted net income rose 10% to $152.9 million, or $1.51 per share. That’s fairly strong, 'cause holding steady or slight increases in revenue & EBITDA is about all investors can expect until its Cotai resort is ready.
The following graphic shows how noteworthy Cotai is from a geographic perspective & why Las Vegas NV Sands’ figures were so much better. Las Vegas NV Sands, Melco Crown (NASDAQ: MPEL ) , & Galaxy have built new resorts there, & they’re all growing quickly on Cotai, sucking the air out of the Macau Peninsula. That won’t alter until Wynn & MGM Resorts complete resorts there. You can think of it as downtown Las Vegas NV versus The Strip in the late 1980s.
Beyond Macau
Las Vegas was a lot better for Wynn, yet it was affected heavily by luck. Net revenue rose 16.2% to $401.4 million, & EBITDA was up 65.6% to $135.7 million, yet table game drop fell 4.8%, showing slowing gaming volume. The huge revenue increase was due to a comparison to a very unlucky quarter in 2012.
Beyond gaming, non-casino revenue was up 3.9% to $302.1 million, & since non-casino revenue accounts for three-fourths of Wynn’s Las Vegas NV revenue, this bodes well for the long-term picture.
Foolish bottom line
Like Las Vegas NV Sands, Wynn’s results fell short of expectations, yet the two companies are on two different paths. Las Vegas NV Sands & Melco Crown will continue to grow & take share as Cotai develops critical mass, while Wynn & MGM just hope to hold steady until their Cotai resorts are complete.
For investors (like me), the hope is in that revenue & EBITDA will double when the Cotai resort opens, yet it’s a long wait until in that happens. Until then, even mild growth is a slight positive for Wynn Resorts, & that’s what we received in the 2nd quarter.
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