Wynn Resorts, Limited (WYNN), MGM Resorts International (MGM): Betting on These Casino Stocks Is Safe!

The company has planned to open Europe’s largest resort in Spain. The project, going by the name of Euro Vegas, should cost around $35 billion and will be covered in more than 1,800 acres. This property will contain four resorts, six casinos, 3,000 rooms, and about 1,000 gaming tables. The foundation of the project will be laid in the current year and the first phase will be completed by 2017. Although the current economic condition of the country is weak, but the company will get some special tax benefits which should help boost its profitability in the region.

Recently the company admitted to potential violation of the Foreign Corrupt Practices Act (FCPA). The company accepted the violations that were related to the books and records provisions. This provision requires documentation/controls be in place to prevent bribery or other misconduct. However, the findings were not material and the company is not restating the balance sheet. This issue was less important than the direct anti-bribery provisions of the case. In the past, the majority of cases have resulted in relatively minimal fine outlays within the range of $10-$20 million, but the worst case scenario, as that of Siemens, can be a $800 million fine. So until some more clarity is obtained on the FCPA case I’ll remain neutral for the stock.

So, which ones are the safe bet?

New properties bring in new investing opportunity. All of the above casino resort stocks have new ventures lined up for the future. Wynn’s expansion in Cotai and the proposed Wynn Resorts, Limited (NASDAQ:WYNN) Everett in Boston should provide some significant upside to the company’s stock in the future. MGM’s new arena in Las Vegas Sands Corp. (NYSE:LVS) should help stabilize profitability in the region. And, the proposed site in Springfield if materialized could significantly increase the foot traffic of the company.

As for Las Vegas Sands, the Macau region saw some near-term volatility in the past, but it is gradually stabilizing. Apart from that, the new proposed resort in Spain, the largest in Europe, could significantly increase the revenue of the company in the future. But the FCPA violation should create some short-term headwinds for the stock.

The article Betting on These Casino Stocks Is Safe! originally appeared on Fool.com is written by Madhu Dubey.

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