Las Vegas Sands posts loss as Gamblers Win and Sink the Casino Growth Sector

The Casino growth story popped severely today. The two poster child's for Macau gambling growth were sold off in bunches. Las Vegas Sands (LVS) posted a LOSS! That's right a LOSS even though its been growing its operations tremendously worldwide. Now some costs of opening new resorts factored into the loss but the bottom line was that the House was beaten this quarter. Gamblers seemed to have their day, not only at the expense of the casinos but their stockholders as well. After hours results from LVS caused shares to drop 15% after an almost 6% decline during the regular trading session. Fellow casino growth brother in arms Wynn Resorts (WYNN) posted a 4% decline in the regular session and was off 8% in after hours trading.

My take on the casino players has always been, through two major articles now, that MGM Mirage (MGM) has the potential to be the most steady and risk averse of the big 3.
From establishing highs recently the high flying momentum casino stocks WYNN and LVS have now accumulated losses of 20% and 30% respectively. Both stocks have more than doubled in the span of the last year so Investors surely must still be satisfied. Now MGM, which also more than double over the past year has only fallen 12% from its high of $100/share. On a foreword P/E basis it is also still the cheapest of the 3 casino players.

Thus MGM is still my Lion in this space and I will be buying if I see the low 80s. I do however think both WYNN and LVS are becoming a lot more attractive on a valuation and potential growth basis after this latest round of quarterly earnings fumbles, but the plan that MGM has is still unfolding in Macau and worldwide and that's the one I want to own.

Disclosure: Author currently holds no position in any of the companies mentioned

Casino Stocks Fall Sharply on Macau Revenue Growth, Investors shouldn't be quick to jump ship

The Major Casino players have been on quite a run during the late summer months, seemingly hitting new highs daily. The front runners have been Las Vegas Sands (LVS), Wynn Resorts (WYNN) and MGM-Mirage (MGM) and the almost meteoric rise was substantially due to the expectations of growth in the sector in Far East regions like Macau.

Today's news has given major Casino players quite the haircut. LVS and WYNN, which are two of the biggest players in Macau were most hurt by the news that year over year Revenue growth for gambling in the region would be only 55%. Only 55%? That's it, ballgame over. Not so fast, but as with all things growth, and you better believe it Casinos are now growth oriented businesses, comes the gift and the curse that is expectations. The Morgan Stanley analyst who reported views of a softer than expected growth rate was expecting growth to top 75% year over year in the region. When you're talking about huge growth, and "miss" will lead to deflation and some investor panic.

Sometime though, growth numbers get thrown around in bunches ever so higher and it takes a session of humility to bring those valuations in check. I think we got that today and Macau, even at more realistic growth projections is still the real deal as the biggest gambling spot on the planet. So as LVS and WYNN drop 12% and 10% respectively, its time to appreciate the opportunity that has finally been given to own these companies. The casino operators will be a sustainable and substantial business going forward and as a long term investor owning a Casino has got to be right up there with owning a Stock Exchange, an Alcohol company, Food & Beverage, Diapers, Soap and Taxes (If you could invest in a piece of a good government!).

The last time I had to chance to speak about Casino stocks was almost 2 months ago ("Gambling on Gambling") and of the 5 companies I mentioned I thought MGM, LVS and WYNN were the only ways to consider playing, leaving Trump (TRMP) and Harrah's (HET) by the way side. My recommendation on a valuation and forward basis at that time was MGM simply because it was very well positioned in its growth prospects and had not received an outlandish P/E ratio that would bring about higher downside risks. When I wrote the article I said that LVS had been the Tortoise, WYNN was the Hare and MGM might just end up being the Lion.

Since the article here's how things have fared.
LVS: +52%
WYNN: +48%
MGM: +29%
HET: +3%
TRMP: -6%

Its clear that the Casino stocks have done very well of late, and I'd love to toot the horn but I missed the party too. I wrote about the stocks but didn't own a single one and while MGM has seen LVS and WYNN breeze past it in terms of gains I'm sticking with MGM as my Lion. The 10%+ haircuts to WYNN and LVS make them more attractive going forward but LVS has a P/E of 135 and forward P/E of 30, while MGM sits at P/E ratios of 30 after its 3% drop today. To me LVS has a lot more to sustain in order to continue rising and any hint of a slow down in growth, like today, will be met with much bigger waves by the market.
Then again sometimes you just gotta hit 16.

Disclosure: Author holds no position in any companies mentioned above at the time of writing

Merger Mania props up Stocks during Wednesday's Session

North American markets got a lift from the early going Wednesday as merger speculation and deal pondering was afoot. Topping the headlines, reports that TD Ameritrade (AMTD) and E-Trade Financial (ETFC) were talking about merging, and although merger speculation from the online brokerages have seemingly been years in the making the thinking was that its for real this time.

Now TD-Ameri-E-Trade as it should obviously be called, if only for the humor, would instantly become the big player in the online brokerage space leaving Charles Schwab (SCHW) out of luck. Due to synergies involved in merging analysts speculated that the combined $10Billion and $6Billion market cap companies could be worth almost $20Billion together.

Further deal speculation surfaced in the exchanges as Nymex Holdings (NMX) revealed it has been in talks with several players about a buyout, including locally based NYSE Euronext (NYX). Shares of NMX were up 6% on the news. In the casino space MGM Mirage (MGM) shot up 8% as it announced receiving a $5Billion investment from Dubai World in the form of company shares and a stake in Las Vegas projects.

Markets overall finished up over 1% on the day with the Canadian side once again faring slightly better than the neighbours to the south. Canadian markets were fueled by easing of some credit worries with almost all sectors well positive on the day.

Gambling on gambling: Investing in Casino Stocks

Red, Black, Hit, Stand, the sound of slots ringing in every direction. The magic and lust of the casino. Las Vegas is an adult playground for sure, but is there money to be made when you're not at the table getting free drinks and losing another hand at blackjack? Perhaps you have an unbeatable strategy for Roulette, or maybe some Texas Hold 'Em is more your style, or maybe you're a sports nut and know the intangibles that will beat the bookies? Either way the casinos profit, and barring a real life Ocean-esque crew knocking over half of Las Vegas they'll continue to profit.

As a gambler, you might know some Casino names like the Bellagio, MGM Grand, The Luxor, Mirage. All owned by MGM Mirage (MGM). Harrah's Entertainment (HET) operates 48 casinos including Harrah's and Caesars Palace. Las Vegas Sands (LVS) operates The Sands and The Venetian, among others. But Vegas isn't the only party anymore, and to be a player in the expanding world of casino entertainment you need to be in Macau. This worldly entertainment center in Asia has exploded over the years as the large Vegas casinos migrate over to cover both ends of the world. But that's not the only place these firms are looking, Europe, Singapore, you name it they are thinking of expanding there.

So where do the investment opportunities lie? Well there's all kinds of buying and selling rumors hitting this sector of late and the one left out of the party seems to be the Donald himself. Trump Entertainment (TRMP) was on the block but reported being unable to find an attractive offer. Regulations problems have also plagued the company of late as it was denied a license in Pennsylvania. These troubles have led shares downwards from the 20s to $7 and change over the past year. Harrah's was in talks and is now going through the process of being sold to Apollo Management.

The Vegas heavy hitters MGM-Mirage, Las Vegas Sands and Wynn Resorts (WYNN) are worth taking a look at. A very high P/E plagues LVS as its growth through expansion led the stock to triple since mid 2005. The stock has since come back from it's high of $109 to a more reasonable $83/share. Still however, the stock seems pricey as earnings estimates for this year put its P/E at over 50. Forward P/E is more reasonable in the 20s and for a company with the expansion plan that it has unfolding in Singapore it just might be worth the gamble.

MGM sports more modest ratios but has also seen a double in market cap over the last year. It will also look for future expansion to increase it's stable of 23 casinos. Wynn is going full force into Macau with it's Wynn flagship resort and its stock has not fallen as hard as the others from their year highs.

Each of these fine casino operators are making money hand over fist and the competition to expand into the rest of the world will see cash flows tighten and margins contract. However the road to major profitability and market cap expansion lies in opening and operating more resorts in exotic and touristic locales. With LVS, MGM and WYNN all sporting market caps under $30Billion the possibility of growth accelerating through these expansions will only be beneficial to the stocks. If LVS is the hare, and WYNN is the tortoise it just seems to me that the steadiest ship in this race is the lion. And MGM can certainly roar!

Disclosure: Author holds no positions in any of the above mentioned companies