Wynn Resorts' ( WYNN ) is trying to win a Boston gaming license and recently revealed its plans for building a casino establishment along the Mystic River. The project will cost close to $1.5 billion and may take 2-3 years to complete. As the Las Vegas casino industry becomes saturated, Wynn and its competitors are looking at other avenues for growth.
Massachusetts is the third richest state in the U.S. with a per capita income that is $ 7,000 higher than the average U.S per capita income. As spending on casinos depends on the disposable income of the individuals, the establishment could attract gamers and tourists from all parts of Massachusetts. Also, Boston is the largest city in Massachusetts. These factors could favor Wynn if the company can get the license and execute the project well.
However, while there may be opportunities to expand in the U.S., most of the growth is likely to come from the Macau region and other international markets. The company should focus more on investing in properties in Macau where its competitors such as Las Vegas Sands ( LVS ) seem to be doing well.
Growth In Macau
Macau's casino industry earned close to $38 billion in total revenues in 2012. This figure is not just substantially higher than that for Las Vegas, but also higher than the figure for the total U.S. casino industry.
Macau's casino gaming revenues grew by 13.5% in 2012. While the growth slowed down compared to that for 2011, it still remained healthy. A slowdown in China's economy impacted the VIP market, but the mass market continues to grow at a fast pace. Compared to 2010, Macau's casino gaming market grew by 42% in 2011.
China has a huge population, and the growing middle class and improving economy will continue to drive the casino industry's growth in the region. It makes sense for Wynn and others to aggressively invest in this market to build a solid foundation for future growth.
Our price estimate for Wynn Resorts stands at $113 , implying a discount of more than 5% to the market price.