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Posted At : March 2, 2009 12:05 PM | Posted By : D McKee
Related Categories:
Wall Street,TV,Macau,International,Steve Wynn,Encore,The Strip,Sheldon Adelson,Economy,Singapore
"Buy Wynn!" is the bottom line of James Dobosz's unqualified endorsement of the stock. He especially likes the recent volte-face that saw Steve Wynn abandon an occupany-driven strategy in favor of high ADRs, on the theory that customers who can afford top-dollar hotel rooms can spring for like-priced spa treatments and restaurant offerings.
Putting a "buy" rating on a casino stock is akin to placing one's head on the chopping block these days. Consider Bernstein Research, which initiated ratings of Wynn Resorts and -- get this -- Las Vegas Sands at "outperform." Bernstein's rationale for the Wynn rating is persuasive, but anybody who writes blithely that Sheldon Adelson's company will "find its way out of its liquidity bind and emerge with a stellar portfolio of assets centered in Asia and including a crown jewel in Singapore," hath quaffed a dram too many of the LVS Kool-Aid, methinks.
The next day brought this "Oh shit!" bulletin from Singapore. A 13% drop in tourism is nothing to downplay, considering that both Marina Bay Sands and Genting's Sentosa Island megaresort will live and die on international business.
Bernstein's $8-a-share bullishness on Sands drew a withering blast from CNBC's James Cramer that began, "All right, you just rolled a seven in craps. That is, if you own the crap known as Las Vegas Sands!" His volcanic tirade is not for the faint of heart ... but Cramer was prescient when he frog-marched gaming stocks off to his "Sell Block" 14 months ago. Read the latest LVS financials and see what you think.
And even if LVS has held the Marina Bay Sands budget down to its $3.2 billion starting point, $300 million in cash flow is but a 9% ROI. We're looking at 5.5% if the worst-case scenarios are accurate. The $1 billion-plus megaresort epoch that kicked off with Bellagio and Mandalay Bay may someday be known as The Era of Diminishing Returns. If you want to buy casino stock, God bless you. Just don't expect the double-digit returns of yore.
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