Today's destination #2 is Macau, one two special administrative regions of the People's Republic of China.
Many are more than likely familiar with Wynn Resorts, run by legendary casino operator Steve Wynn. The stock, which is traded on the NYSE (WYNN) has enjoyed a remarkable rise in the last few years, currently at a little over $125 a share.
Wynn has operations in both Vegas (Wynn and Encore) as well as Macau (Wynn and Encore). The Wynn Macau offers 600 hotel rooms and suites, approximately 212 table games and 375 slot machines in approx 205,000 square feet (19,000 m2) of casino gaming space, five restaurants, 26,000 square feet of retail space and much more.
While Wynn's Vegas operations have rebounded reasonably well since the 2008 downturn, it's the Macau operations that are largely responsible for sending the stock soaring.
In terms of Wynn's recent earnings call:
For the Vegas operation:
For the third quarter ended September 30, 2011, net revenues for our Las Vegas operations were $346.9 million, 3.7% higher than in the third quarter of 2010.
For the Macau operation:
In the third quarter of 2011, net revenues were $951.4 million, a 41.7% increase from the $671.4 million generated in the third quarter of 2010.
The one area where Macau has not seen the same level of business is the non-gaming operations.
Gross non-casino revenues at Wynn Macau increased 32.4% during the quarter to $102.6 million, driven by strong performance from all non-casino segments.
Gross non-casino revenues for Wynn Las Vegas for the quarter were $265.9 million, an 11.1% increase from the third quarter of 2010, driven by higher revenues across all non-gaming segments.
While many think the current economic fundamentals will cause an erosion of the growth in Macau, the recent statistics continue to prove otherwise, as the stock has rebounded from a few sizable dips over the last year that have been brought on by such concerns. Regional growth and rising wages have also likely contributed to sustained business activity at Macau's casinos. Still, nothing grows to the sky, and while Macau will likely to continue to remain a tourist destination, the current growth rates are almost certainly not sustainable. For the meantime, however, casino operators continue to see growth that has continued to exceed expectations - and that could certainly continue over the longer-term, with some bumps in the short-term.
Speaking of "bumps", Wynn Macau - as well as other Macau casino stocks (such as Sands China) are extremely volatile, and not for the timid: they are exceptionally susceptible to any fears of a slowdown, especially in regards to VIP revenue. "About two-thirds of Macau’s gambling revenue is from high-roller VIPs, who play in specially designated rooms and bet with credit supplied by junket organizers." http://www.marketwatch.com/story/macau-casino-stocks-hit-by-vip-revenue-worry-2011-10-03?siteid=yhoof. Another issue with the casino stocks is Macau's regulations, which - understandably - are trying to place some limits on gambling in order to try to diversify Macau and attract a more widely varied tourist audience. This month, the government confirmed its stance that the number of gaming tables would be limited to 5,500 until 2013 - and the amount currently in operation is not much less than that. Macau has also encouraged companies to expand non-gaming operations. A massive bridge project linking Hong Kong-Zhuhai-Macau will also likely help increase tourism, although it is not expected to be complete until 2015-2016.
Wynn also is on track to open another casino in 2014-2015 in the Cotai district of Macau.
In terms of October, 2011:
"Gambling revenue in the Chinese territory rose to MOP26.85 billion (US$3.36 billion) in October, up from MOP18.87 billion in the same month a year earlier, data from Macau's Gaming Inspection and Coordination Bureau showed.
October's revenue haul beat the territory's previous high of MOP24.77 billion hit in August. It was boosted by China's "golden week" holidays, which fall in May and October. The former Portuguese colony, an hour from Hong Kong by ferry, is the only place in China in which casino gambling is legal, helping revenue there exceed that of neon rival Las Vegas fivefold. The October revenue figure of $3.4 billion is more than half of what Las Vegas is expected to make for the whole of 2011."
http://www.reuters.com/article/2011/11/01/uk-macau-revenue-idUSLNE7A002R20111101
All that said, while Wynn is at $125, some may not be aware that the Wynn Macau operation is listed separately on the Hong Kong market, with ADR and foreign ordinary shares available in the US. The US foreign ordinary shares are - at least as of 11/9/11, $2.86. As with other foreign stock posts on this blog, this is not an investment recommendation, but - in this case - an attempt to show how a foreign portion of a company's operations may be listed separately. There are other examples of this, which will be profiled in future entries.
US Stock: WYNMF (foreign ordinary), WYNMY (ADR)
Avg volume: 58,030 (3m/as of 11/9/11)
Hong Kong: 1128.HK
Avg volume: 11,998,000 (3m/as of 11/9/11)
Website: http://www.wynnresorts.com/
Recent Investor Presentation: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDQwODA4fENoaWxkSUQ9NDYyNjQ1fFR5cGU9MQ==&t=1
