Investors aren’t looking to Las Vegas for the ultimate "sin dividend" these days. . .
They’re looking across the globe to the former Portuguese colony of Macau — "the Vegas of the Far East." Just across the water from Hong Kong and China, Macau is drawing the biggest casino developers in Sin City. Developers like Steve Wynn.
Wynn is building big in Macau, where gambling is legal and millions of nominally communist Chinese test fresh fortunes every year.
During a period of spectacular growth on the mainland, the number of visitors to Macau nearly tripled to 26 million in 2007 from just 9 million in 2000.
Wynn Macau (HK:1128) debuted last week with the "first Las Vegas-style blended resort in Asia," drawing a 13% premium on its IPO price in the first several hours of trading.
That nearly equals the 14% one-year return on Wall Street’s Wynn Resorts (NASDAQ:WYNN)!
It would be logical to say that Americans aren’t apt to double down in uncertain economic times. . . but gambling is about anything but certainty.
And the fact is that Wynn’s competitors like Las Vegas Sands (NYSE:LVS) have outrun Wynn during the current market rally. LVS is up 32% over the past year, including its own late ’08 dive. With even chips on each a year ago, bets on LVS did a lot better than the same money on WYNN.
So, why didn’t Wynn win?
Well, Steve Wynn built a new Vegas resort hotel called the Encore, just down the street from where I am right now. It bears the same signature flourish as his older Wynn hotel, and it looks pretty much the same. But the circumstances of Encore’s opening could have led to disaster. . .
Bad Timing for an Encore. . . Better Timing for a Macau IPO
Encore opened just before Christmas 2008, right in the eye of the economic storm that hit late that year. Wynn kept his poker face, saying in January 2009 that he and his managers faced little more than a "room-pricing decision." The financial meltdown meant that instead of filling Encore with high rollers ("whales," as they call them here), you could get a $300 room for $179/night.
That’s not just a room-pricing decision. . . that’s a huge chunk of potential revenue left unrealized.
Things are looking up now, but Wynn Resorts (NASDAQ:WYNN) shareholders have been hobbled during the Wall Street rebound due to Encore’s bad timing.
And as opposed to the inauspicious opening of Encore, Wynn Macau listed just after two positive developments for Macau casino companies:
First, the Chinese government relaxed travel restrictions on mainland residents and tour operators heading to Macau.
Then, after a dismal first half of 2009, September gaming revenue in Macau shot up by more 53% from the same month in 2008!
Now, Steve Wynn could have opted to channel new Macau money into WYNN to enhance his company’s domestic market value. Instead, he opted to take Wynn Macau public in the market that gives international investors the most access to new Chinese wealth — the Hong Kong Stock Exchange.
And we now have a pure play on Wynn’s Asian operations.
Wynn Macau’s IPO and a planned LVS Macau listing should enjoy tailwinds propelling them — instead of stiff resistance holding them back. That momentum may even help those companies’ respective U.S. listings, as well.
Of course, there is still plenty of money to be made here in Vegas and in Vegas-related shares on Wall Street. There is a strong contingent of the investing community that loves to tap "vice stocks" in gambling, alcohol, tobacco, and other sectors considered "adult entertainment."
In my time here in Las Vegas, I’m digging deeper — talking to everyone from bartenders to career slot technicians to find you the best ways to make money in Vegas without ever having to touch down in this decadent desert.
As for Wynn Macau, it’s part of a much broader trend. More and more online trading sites and traditional brokerages like E-Trade now allow you to access superior profit opportunities that are only available on foreign exchanges.
Hong Kong is becoming a premier international market, and you can’t afford to ignore it. Ask your broker, or check your self-directed account for details on tapping HK-traded shares.
P.S. Investing in Hong Kong gives you access to much more than tangential Chinese gambling plays. In fact, Warren Buffett recently turned a $1 billion profit by investing in a Hong Kong-listed battery maker. I put a buy out on the same stock. . . and am now up over 500%. Seeking out fast-moving international plays can be a boon for any investor’s portfolio. You may have missed Buffett’s battery play, but the next international money-making opportunity is just taking shape.