anyone in LVS/ WYNN/ MGM?

U

universaller

It looks like they have been weak for last 5-6 trading days.

LVS:
- went HK IPO and raised $2.5bn cash, so current cash balance is about $5bn
- continue its development in Macau to complete the project (#5, 6 lots)
- Macau's November casino revenue was up 60% yoy
- had $270bn EBITDA in 3Q and expected to rise with MBS (Marina Bay Sands in Singapore) completion toward the end of March

WYNN:
- went HK IPO as well and now it has $3bn in cash
- profitable and paid $4 special dividend in Nov, announced that it would start paying regular dividend in 1Q 2010
- Wynn's 2nd unit in Macau (Encore) is expected to be completed in 1Q 2010

MGM:
- just completed CityCenter in Las Vegas
- owns most of casino hotels in LV
- pursuing its expansion in Macau through JV
- KK is considering in selling his majority stake to another strategic partner, i.e. he's open for M&A discussion (btw, Icahn is trying to buy Fontainebleau casino in LV)
- (my analysis) if PE/ HF consider taking the majority of MGM, i think potential price range would be $17 to $20.
- (my analysis) based on its properties, liquidation value is about $28 range. as an example, MGM sold TI (treasure island) to Ruffin in early 2009 due to its financing issue for $750m. the premium over TI's book value was 42%.
- MGM owns Bellagio, MGM Grand, MGM Mirage, New York-New York, Luxor, Monte Carlo, Excalibur, Circus Circus, Mandalay Bay...


right now, the issue is that Las Vegas is not performing well due to the recession, but the stock price (especially MGM) is below its liquidation value.

plus, all three of them have enough cash to cover debt/ interest payments through 2010.

given the fact Chinese's economy is improving, Macau casino business will do very well through 2010. on October, the visitors from other Chinese provinces to Macau was so strong that chinese government imposed a limit on visa, but as it turns out it was bogus. November's figure shows that the revenue (after visa restriction) are still strong (+60% yoy).

the current market size of Macau is already about 3x larger than Las Vegas, and i think Macau market will be 10x larger than Las Vegas pretty soon (especially after LVS's expansion completed in 2010)
 
They were all up on hype of the new opening of City Center that many think will bring more people to Las Vegas. Who knows what to expect, if this $8.5 Billion dollar project doesn't do it for MGM things will be turn down quick for all casino stocks. This is the biggest $8.5 Billion dollar bet ever on this strip and if things do not work out due what ever reason most of these stocks will see a drop of 50% or more. Remember they are already up significantly over the last 8 months.
 
I agree with you that these stocks have been up since March, but the majority of US stocks have gone up at the same time.

I noticed that some of you might think about bankruptcy issue-
All three (MGM, LVS, WYNN) have enough cash on hand/ cash flow to meet its debt obligation for 2010.

LVS:
after HK IPO, the company is considering to pay down the debt by $1.8bn (remember, LVS raised 2.5bn by selling its macau unit (30%) in HK exchange)

WYNN:
it raised $1.6bn through HK IPO as well. for Wynn, debt burden is low that it doesn't need to pay down the debt. $4 special dividend/ regular dividend for 2010 is now on schedule.

MGM:
this may be the weakest link here, but KK may sell his majority stake to another buyer. Once the discussion goes, MGM won't be trading at liquidation value.
 
The more casinos are build the more delution in earnings for all of them. Plus how do unemployed people or the rest who are scared to loose a job will be gambling?
 
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