Casino Royale – SANDS, WYNN, MGM's Bet

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Nov 17 2006
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We have Daniel Craig, the new 007 agent in the latest James Bond movie. Somehow our immortal agent can’t escape from casino scenes in most of the past movies. Together with hot-babes, the new James Bond is set to save the world again. Guess the image of casino represent status and wealth.

Casino stocks have soared amid hopes for lucrative paydays from expansion into the Asian gambling hot spot. Mega-resort operators Las Vegas Sands ( NYSE : LVS ) and Wynn Resorts ( Nasdaq : WYNN ) hit 52-week highs in mid-November amid optimism about the potential for growth in Macao, the gambling center near Hong Kong. MGM Mirage ( NYSE : MGM ) also has a stake in a Macao venture scheduled to open in 2007.

Both have the fundamentals which attracted analysts but since the stock price rally, it could be expensive to own. On Nov. 16, Sands hit a 52-week high of $92.90, up from $38.07 last December. Meanwhile, Wynn reached its own peak of $96.50 on Nov. 16, up from $51.57 a year ago. MGM also hit a 52-week high on Nov. 16, touching $48.60 after trading below $35 per share in September.

Wynn’s shares benefited from an announcement on Nov. 13 that the company would pay out a per-share cash dividend of $6—and news a few days later that it would double down and expand Wynn Macau, which opened in September in the new gaming Mecca.

Wynn, the smaller company, had a P/E ratio of 15.30 with 12-months sales of $ 1.1 Billion (59.25% net-profit margin) while Sands’ was an incredible PE of 72.10 with 12-month sales of $ 2.1 Billion (20.86% net profit margin). MGM P/E is at 24.6 with 12-months sales of $ 7.4 Billion (however it’s net profit margin is only at 7.36%).

In comparison, Google ( Nasdaq : GOOG ) which has attracted both supporters & critics on its’ high stock price has P/E of 62.60.

Looking beyond Macao, Sands plans to open a casino in Singapore and wants to build another in eastern Pennsylvania. Next year it is slated to open The Palazzo in Las Vegas, yet another ultra-luxury resort and casino. Not to be outdone, Wynn is building Encore, an expansion to its luxury Wynn Las Vegas property.

Wynn predicts Macao will surpass Las Vegas in casino revenue. In 2005, Macao gambling pulled in $5.57 billion to Vegas’ $6.03 billion. Most analysts nevertheless agreed to wait for the stocks to pullback before investing.

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