'The Vegas of the East', And a $22 Billion Cash Mine

by: Investment U

By Alexander Moschina

Just 40 minutes from Hong Kong, the chips are rattling… the slots are ringing… and casino operators are raking in enormous sums of money.

While gambling revenue in Atlantic City is down 8.7% from last year, the story couldn’t be more different in Macau. The city’s gaming revenue recently blew past the $15 billion generated in the United States last year and analysts predict revenue will surpass $22 billion for the whole of 2010.

Take Melco Crown Entertainment (Nasdaq: MPEL), for example. Over the past 12 months, the casino operator grew its sales by 165.8%. And for 2011, revenue is expected to jump from $2 billion to $2.6 billion.

While it owns three franchises in Macau, the company’s biggest moneymaker is The City of Dreams. The development, situated in the heart of the city, brought in second quarter revenue of $309.3 million. That’s up from just $26.8 million a year ago – an increase of 1,054% in just 12 months.

And it’s not the only company experiencing this blistering growth…

The “Vegas of the East” Crushes U.S. Gambling Revenue

At Wynn Resorts (Nasdaq: WYNN), the company reported a 74% increase in its Macau business.

And MGM (NYSE: MGM) Grand Macau’s operating income grew more than $40 million, compared to an $8 million loss a year ago.

It’s no wonder China plans to double the size of its border gate in February. The new entryway will allow 500,000 visitors per day. That’s a 150% increase in traffic – and a potential profit explosion for Macau’s gaming industry, too.

All this is just icing on the cake for one Las Vegas giant. In fact, its Macau operations have been so successful that the company is changing its name to reflect a global presence…

Sands Macau Thrashes Vegas by 276%… and Counting

Las Vegas Sands (NYSE: LVS) is now the top U.S. casino operator in Macau. Its second quarter operations alone scooped in $1.04 billion.

Meanwhile its U.S. operations, The Venetian and Palazzo, only delivered $276.2 million combined. That success outside of the United States led CEO Sheldon Adelson to say in a September 14 interview that the company will likely change its name to either “Sands International” or “Sands Resorts International.”

Year-to-date, Sands’ shares are up 253%. In fact, nearly all the casino stocks I mentioned above are trading significantly higher than they were at the start of the year.

All except MGM. Why has it lagged? Because of its battles with debt and poor earnings, due to the fact that the majority of its business remains in Las Vegas.

But don’t count MGM out just yet. Strong earnings from companies like Penn National Gaming (Nasdaq: PENN) and Century Casinos (Nasdaq: CNTY) indicate that American consumers are ready to roll the dice and lift casinos’ domestic prospects.

Add this to the Macau momentum, and 2011 is shaping up to be a great year for casinos.

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