Forget MGM, Get a 190% Return on WYNN

| About: Wynn Resorts, (WYNN)
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To me, there is only one name in Vegas: Steve Wynn. When investing in certain sectors, you want to invest with the most experienced person you can find. Mr. Wynn was buddies with Frank Sinatra and rumor had it that if you wanted Sinatra to play at your hotel, you had to buy liquor from Steve Wynn. Mr. Wynn has survived every recession, even the one in the early 90's that began just after he opened up the first of the mega hotels, the Mirage. He survived the most recent one. And now, with Macau exploding, decades of experience behind him and a conservative capital structure, I believe shares of Wynn Resorts (NASDAQ:WYNN) have a long rise ahead of them.

The biggest mistake a hotel operator can make is to over-leverage. One look at MGM Resorts International (NYSE:MGM), which barely escaped bankruptcy after being crushed under $12 billion in debt, should tell you that. Mr. Wynn took his company public via an IPO, but when it failed to provide the $1 billion they'd hoped for, he and his partner put up the rest instead of taking on additional debt. Today, the company sits on only $3.1 billion of debt, a mere 17% of its enterprise value. MGM's debt makes up 70% of its enterprise value, while Las Vegas Sands (NYSE:LVS) carries $9.2 billion, or 24% of its enterprise value.

While Las Vegas slowly recovers, business is booming in Macau, where Wynn has assets. Forbes just reported Macau gaming revenue is up 42% YOY. The same article points out that competition is so fierce, that Mr. Wynn's market share fell from 17% to 12%. Am I worried? Not a bit. Mr. Wynn has faced heavy competitor many times before. He'll face it again and win. Just as he redesigned Encore's entrance into an exclusive beach club, he'll find ways to attract more visitors to his Macau property. Indeed, S&P just boosted the company's credit rating.

Mr. Wynn isn't resting on his laurels. He continues to expand. He added Encore to his Chinese properties last year, that helped increase revenue 47% to $865 million and EBITDA 50% to $273 million in Q1.

How is this actionable?

Wynn and his ex-wife own 20 million shares of their own company, or about 18% of the float. That kind of insider holding is a big plus to me. Analysts expect earnings to double this year and grow another 21% next year, with a 38% compounded annual growth rate over the next five years. Slapping a 38x multiple on this year's earnings of $4.31 gives a target of $164. That's 23% above today's price and an expected 38% share price increase over each of the next five years. I say WYNN is a definite buy for that 190% return over that time period.

Mind you, there's plenty to like about Las Vegas Sands, as well. The company trades at a lower p/e (23) with 25% five-year projected annual growth. I think MGM is a huge risk right now. Their only hope is Macau and a continued U.S. recovery. Otherwise, their debt is just too enormous.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.