Melco Crown Entertainment Ltd (ADR) (MPEL) Is Not Just A Play On Macau

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Las Vegas Sands is the most valuable casino company in the world. It owns prime properties in Macau and Las Vegas and is one of only two casinos in Singapore. The biggest potential for Las Vegas Sands’ shareholders is the company’s plan to build a EuroVegas in Madrid, Spain. The first phase won’t be complete until 2017, but the potential is huge for Las Vegas Sands, as Spain is a popular vacation destination for Europeans.

MGM is probably the most undervalued of the casino stocks. The company has too much debt that it undertook before the recession hit. MGM has slowly been working to improve operations and pay down debt. The good news is the company’s stake in MGM China is doing very well. Analysts at Sterne Agee have valued MGM’s stake in MGM China at $14. With MGM stock trading just above $15, you’re getting all of its Las Vegas operations practically free.

Wynn Resorts is run by industry legend, Steve Wynn, and he owns a 9% stake. The company owns some of the premier properties in Las Vegas and Macau under its Wynn and Encore brands. Wynn’s focus is on the high-end luxury segment, which targets VIP customers. Wynn Resorts gets 70% of its revenue from Macau and only 30% from its Las Vegas properties.

All three competitors to Melco Crown are further investing in Macau and are set to open new casinos in the next few years. MGM China is building a new $2.5 billion resort in Macau on the Cotai Strip. Wynn’s project on the Cotai Strip is expected to be completed by Chinese New Year 2016. Las Vegas Sands is expanding its Cotai Central with the addition of hotel brands Conrad, Sheraton, and Holiday Inn. Las Vegas Sands is considered to be the single largest investor in China.

The hedge fund trade

Among the hedge fund crowd, Christian Leone’s Luxor Capital Group has the largest stake with almost 6.2 million shares, worth almost $145 million. Following is Rob Citrone’s Discovery Capital Management with over 4.1 million shares, worth over $96 million, and Emerging Sovereign Group with over 3.3 million shares, worth almost $79 million. Among the notable newcomers to the stock are billionaire Louis Bacon’s Moore Capital Management with a $58.4 million call position.

Foolish assessment

Melco Crown is a pure-play on casino growth in the Asia-Pacific region. For this reason, I see it as the best casino stock for continued growth. The Chinese have an insatiable appetite for gambling, and I see Melco Crown being a prime beneficiary of this trend.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Melco Crown Is Not Just A Play On Macau originally appeared on Fool.com.

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