Investors appear to be over the downswing that occurred in
January, with stocks surging in February and closing at or near all-time highs.
Stocks are now poised to continue their march
upwards, yet some industries are in the perfect position to outperform the rest
of the market. The industry I plan on talking about in this article is the
stocks have been on a tear as recently as last year, and I have repeatedly
expressed my bullish opinions on them. As the global economy recovers people,
now more financially secure, are having the opportunity to spend their money on
fun, a trip to Las Vegas or Macau for example. All major casino companies have
so far reaped the rewards of a resurgent economy and there stock shows it.
International- Up 121% in the last year
Las Vegas Sands Corp-
Up 66% in the last year
Wynn Resorts- Up
108% in the last year
Melco Crown Entertainment-
Up 121% in the last year.
casino companies (All of which have an international presence) have easily
outperformed the Dow and the S&P 500 which were up 16% and 22% in the same
period of time. But what drove these particular companies to higher earnings
and increased market share was there investments and expansion into Macau,
which has become the new gambling capital of the world with six times the
revenue of Las Vegas.
Vegas recovers slowly from the collapse in 2008, Macau has grown in leaps and
bounds. As the only place in China that has legal Casino gambling, the gaming
the tables of Macau draw in customers from all over Asia (In 2013 Macau
generated $41 billion in gambling revenue, at the same time Las Vegas made just
$6.5 billion). In 2013 Macau provided 61% of all revenue Sands generated,
another 30% came from the Sands casino in Singapore.
numbers show just how important Asia is to the big players in the Casino
market. Other Asian countries like Singapore and the Philippines have seen the success
of casino gambling in Macau and have legalized it as well. But another enormous
gambling market seems to be close to opening, Japan.
well known that the Japanese are enormous gamblers and estimates show that the
gambling market in Japan could be as large as $10 billion, making it
potentially the second biggest casino market in Asia and potentially the world.
With the 2020 Olympic games being held in Tokyo It has become probable that the
Japanese government will legalize Casino gambling come spring and if they do
the question becomes which companies are in the best position to exploit the
3 American Casino companies; Las Vegas Sands, Wynn Resorts, and MGM Resorts are
all contenders in a Japanese market and all 3 companies have announced that
they are willing to invest billions into developing integrated casino resorts
in Japan. But which company stands the best chance of gaining the dominant
share in a Japanese market?
Las Vegas Sands-
In terms of capital The
Sands might be in the best position to develop Casino resorts in Japan. The
Sands is currently the largest Casino Company in the world with a market cap of
almost $70 billion, compared to Wynn’s market cap of $24.5 billion and MGM’s
capitalization of $13.5 billion.
also seems committed to Asia, with 5 of its 8 casinos located in Eastern Asia
(1 in Macau, 3 on the Coati Strip, and 1 in Singapore, with the intention of
building more in the Philippines and Taiwan.) C.E.O of the Sands, Sheldon Adelson
has recently abandoned the plan to build a $30 billion mega resort in Spain and
instead decided to focus his attention on Asia with a possible $10 billion
investment in Japan.
clear Sands is serious about Asia and Japan and the company is already the largest
foreign casino operator in Macau, with clear advantages over its rivals in
When it comes to the world
of Casino gambling Steve Wynn is a legend, after inventing modern Las Vegas and
selling his Mirage Resorts to MGM, Wynn has started another Casino company
which he has grown into a company worth over $20 billion with a casino in Las
Vegas and Macau (with another under construction).
has expressed interest in Japan, saying that the company would invest well over
$4 billion once casino gambling is legalized. Wynn is in a strong position to expand
into Japan but with another $4 billion casino project currently going on, on
the Coati strip it is conceivable that breaking ground on another multi-billion
dollar project could be seen as over expanding.
casino in Coati is scheduled to be finished in 2016, building a Casino in Japan
would take another 5 years. Although Wynn will most definitely expand into
Japan the financial burdens of continuing two large projects might adversely affect
Now I am
not saying Wynn will not be a player in the Japanese casino market it will be
but Wynn might have to delay the construction of a Japanese Casino until its
Wynn palace is finished in Coati.
The day after Las Vegas Sands
announced that it would invest about $10 billion into Japan; MGM announced that
it too would consider investing about $5-10 billion to develop Casinos in Japan.
the Sands and Wynn, who derive most of their income from their Asian
properties, MGM makes about 65% of its revenue in the U.S and the rest from its
sole property in Macau (MGM Macau in which MGM owns 51%).
financial position though is not as strong as Wynn’s and the Sands, the casino
company is still recovering from a collapse in 2008 and the company posted a
$38 million loss in 2013, even though is a great improvement from the $1.2
billion loss in 2012. MGM will likely see a return to profitability this year
but it is questionable whether the company could even afford to expand into
All three companies have expressed interest
in partnering with local Japanese companies such as Mitsubishi to help develop
the casinos. Also MGM, Sands, and Wynn are not the only companies planning on
entering the Japanese market. Caesars Palace and Melco Crown have also
It is expected that Japan will
legalize gambling by June and once the news is out all the major casino
companies of the world will try to get a piece of the market. But in the end
the company I think that will triumph and gain the largest market share is Las
Vegas Sands, with the greatest financial might of any Casino company in the
world, the Sands should have no problem breaking into and taking over the soon
to be second largest casino market in the world.
WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.
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