Will Malta Become The Macau Of The Mediterranean?

Includes: CCL, LVS, MGM, WYNN
by: Jonathan Yates

For casino and resorts companies such as Las Vegas Sands (NYSE: LVS), Wynn Resorts (NASDAQ: WYNN), MGM Resorts International (NYSE: MGM), and Carnival Corporation (NYSE: CCL), Malta could be the next gambling destination to rival Macau in attracting high rollers from around the world.

"Malta offers a combination of the best that Macau, Hong Kong, and Singapore have to offer to a company like Las Vegas Sands," remarked Ivan Camilleri, Founder and Director of Corporate Solution Limited, a Maltese company specializing in gaming and other business operations. He furthered that, "There is a sound legal and regulatory system that is very inviting to casino operators, particularly for I-Gaming. Malta is located at the crossroads of the Mediterranean with a financial system that has long attracted a great deal of capital from abroad seeking the most favorable jurisdiction. That is already starting to happen with the gambling industry, too."

Las Vegas Sands just received approval from the Government of Macau to add 200 more gaming tables. "Units like that could easily be handled in Malta," Camilleri noted. "It is already a world-class resort with a robust tourist industry infrastructure and highly trained workforce, especially for gaming operations. The efficient legal system is favored for registration by many private jet and ship owners and operators from around the world. Casino and resort owners will naturally follow this formidable flow of money."

These new tables in Macau should produce about $2.5 million each in net revenue for Las Vegas Sands, estimate analysts. Already Las Vegas Sands has 1350 gaming tables in Macau. MGM Resorts and Wynn Resorts also have substantial operations in Macau. Each is planning large expansion projects in the island off the coast of China. Like Macau, Malta is an island, located between Europe and Africa, closest to Italy.

It has been a good year for casino and resort companies. Private equity groups have pursued opportunities in the sector. Year to date, Wynn Resorts is up 4.47%. For 2013, Las Vegas Sands has jumped by 11.13%. MGM is higher by 6.79% for the same period, with Carnival Cruise Lines down slightly due to industry woes for ocean liners.

But the analyst community is even more bullish for the future of the casino and resort sector. For the next five years, earnings per share are expected to increase by 12.97% for Carnival Cruise Lines. MGM Resorts International is projected to enjoy earnings per share growth of 13%. Earnings per share are predicted to rise by 10.90% by Wynn Resorts for the same period. Over the next half-decade, the shareholders of Las Vegas should see earnings per share jump by 13.38%.

This could increase even more if Malta becomes a major gambling hub, as many are expecting. Macau already generates more than six times the revenue of Las Vegas. More and more middle class Chinese are now going to Macau to gamble. As a result, last month, gambling revenue in Macau increased by 11% from a year ago to$ 3.39 billion, topping analysts' estimated.

The competitive advantage of Malta could be for the high-end roller, the proverbial whale. According to a recent article in Investor's Business Daily by James Deter about Macau, "…high rollers who spend more are shying away amid a crackdown by the Chinese government…" With the globe their gaming table, this big money will head to casinos and resorts where they are treated best. "Casino and resort operators are shifting towards growth in emerging markets. It is only a matter of time before the smart money moves in a large way to Malta," predicted Camilleri.

For investors, look to Las Vegas Sands and Wynn to move first, followed by other niche players. For those in Malta first, the bottom line will be the winner.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.