Casinos Bet on Emerging Markets
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Next week, I’ll be attending a conference in Las Vegas and while I doubt I’ll do much gambling, many others are flocking to casinos there and abroad as the economy recovers.
Just last week, in fact, Las Vegas Sands (LVS) crushed analysts’ estimates for the third quarter. The company reported earnings of 34 cents per share versus three cents a year ago, blowing away forecasts of 23 cents. And Las Vegas Sands’ revenue soared 67% to $1.91 billion, coming in above estimates of $1.8 billion.
The growth was largely fueled by solid growth at the company’s Sands’ Macau property and the first full quarter of its Marina Bay Sands Singapore operation. Staking a claim in the fast-growing emerging markets has helped Las Vegas Sands immensely.
According to Macau’s Gaming Inspection and Coordination Bureau, gambling revenue for all casinos operators there surged 40% to $1.91 billion in September alone! That’s the fourth highest number this year.
And Las Vegas Sands’ growth in its original stronghold is doing well too. The revenue from the company’s main strip of casinos in Las Vegas jumped 21% to $544.4 million in August.
This is what Editor Michael Cintolo had to say about the company recently in Cabot Market Letter:
“In Macau, [Las Vegas Sands’] cash flow surged a very healthy 40% and now accounts for fully half of the company’s total. More impressively, in Singapore, the Marina Bay Sands might be the most successful new casino of all time; revenues for the quarter totaled $486 million (this comes less than six months after opening) and cash flow was a whopping $242 million. Unbelievably, management thinks that this one property alone could produce upward of $2 billion of cash flow in 2012. Imagine!
“It’s no surprise, then, that analysts have rushed to hike their estimates going forward. The average earnings estimate for next year was $1.05 two months ago. Now it’s up to $1.62! And, clearly, if Asian economies (many gamblers in Macau and Singapore come from other countries) continue to expand, there’s no reason Sands’ casinos can’t keep performing better than investors expect. …
“ … Las Vegas Sands has been an outstanding performer, and things have gotten even better since the company reported blowout earnings last week; sales and earnings crushed expectations, and the stock has taken flight since that report. While we remain very bullish on the firm’s longer-term future, the stock is now extremely elevated above any support, and is showing signs of shorter-term exhaustion. Thus, we’re going to do some offensive selling (on the way up in price), letting go of one-third of our shares here and putting the rest on hold. We plan on giving our remaining shares plenty of room to breathe in the weeks ahead.”
Since Mike recommended LVS to Cabot Market Letter subscribers, the stock has more than doubled … and it’s up another 50% since he recommended adding more shares in September. As Mike says above, the stock is way overextended now after its huge run, so this probably isn’t the best time to start a position. But we still love the long-term story and don’t think the stock is going away any time soon.
While Las Vegas Sands is the leader of the casino group, another stock, Wynn Resorts (WYNN), has been doing well lately, also boosted largely by the growth in Asia. Here’s what Mike had to say about it in a recent issue of Cabot Market Letter:
“While Las Vegas Sands (LVS) is the leader in the gaming group, Wynn Resorts has its own great story, with the Wynn Macau, Wynn Las Vegas and Encore at Wynn Las Vegas pulling in the dough. Wynn booked a whopping 478% increase in earnings in Q2, with a 43% gain in revenues. And with the giant Wynn Macau (nearly 400 game tables, 1,200 slots and six restaurants) providing access to the increasingly wealthy Chinese population, investors are expecting great results when the company reports Q3 results on
November 2. WYNN has lagged LVS for a while, but the stock took a huge leap last week, pushing the stock to new multi-year price and RP highs and showing that there’s more than one way to play the Macau connection.”
The company reported Q3 fiscal results on Monday. Wynn saw revenue climb 29% to $1 billion, beating analysts’ expectations of $990.8 million. The company earned 39 cents per share, in line with the average Wall Street prediction. But the real news is that the company’s Macau revenue surged 50%. Like LVS, WYNN has been on a tear and may need some time to rest. But also as with Las Vegas Sands, we still believe in the long-term growth story at work here.
For more on Las Vegas Sands and other leading growth stocks, check out Cabot Market Letter, where you’ll find in-depth fundamental and technical analysis, Buy, Sell and Hold advice, as well as our proprietary market timing indicators.
In this week’s Stock Market Analysis Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says that it’s been a good week in the markets. Paul takes a look at the stocks that had the biggest gains on Thursday, when the market hit its highest level since September 2008. Stocks discussed include Baidu (BIDU), Mexco Energy (MXC), Sunrise Senior Living (SRZ) and Westwood One (WWON). Click here to watch.
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10 High-Yield Winners for 2011
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In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
On Monday, Chloe Lutts discussed one of Google’s lesser-known features, Google Trends, and how it can be useful for tracking social search patterns. She also discussed Google’s flu trends tracking and development of a price index. Chloe finished by featuring a recent Google recommendation from Cabot Top Ten Weekly. Featured stock: Google (GOOG).
On Thursday, Paul Goodwin discussed the performance of emerging markets versus developed markets in 2010 and what that means for your portfolio. Paul also discussed a Colombian banking stock that he recommends as a good long-term holding. Featured stock: Bancolombia (CIB).
Until next time,
Editor of Cabot Wealth Advisory