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Sands, Wynn get boost from Macau

4 September 2007

LAS VEGAS, Nevada -- Interest in the growing Macau casino market fueled investors' actions regarding shares of two gaming operators during August. The stock prices of other companies weren't so lucky.

Las Vegas Sands Corp., which opened the $2.4 billion Venetian Macau on Tuesday, and Wynn Resorts Ltd., which reported better-than-expected earnings in early August, recorded double-digit increases in their average daily share prices during the month.

The jump by the two companies was enough to move an index that tracks the average daily price of six casino operators and three slot machine makers upward when comparing August with July.

The average daily stock price of gambling equipment maker Bally Technologies was the only other gaming company tracked in the index to record an increase in its average daily August stock price.

Shares of Las Vegas Sands averaged $97.77 on the New York Stock Exchange during August, 20 percent higher than in July. Shares of Wynn Resorts averaged $113.78 on the Nasdaq National Market in August, 17.6 percent higher than July.

The index, which is compiled by Las Vegas-based financial adviser Applied Analysis, moved up 41 points in August to 514.81, its highest level in history.

Brian Gordon, a partner in Applied Analysis, said gaming companies reported relatively strong earnings for the second quarter, which sparked demand in the stocks.

Also in August, MGM Mirage announced a $5.1 billion investment into the company by Dubai World, the business arm of the Persian Gulf state. The deal will give Dubai World 50 percent ownership of the $7.4 billion CityCenter development on the Strip and up to a 9.5 percent interest in MGM Mirage.

The deal was announced Aug. 22, which didn't leave enough trading days for the company's average daily stock price to see an impact. Shares of MGM Mirage averaged $76.51 in August, down almost 7 percent from July.

"Some of the pickup related to the transactions took place relatively late in the month," Gordon said. "We expected the uptick in the average daily price will be reflected next month."

The opening of The Venetian Macau, which has 3,000 hotel rooms and a 500,000-square-foot casino, gave Las Vegas Sands its second casino in Macau and its first on the developing Cotai Strip, which is expected to have eight hotel-casinos operated by the company. Wynn operates the year-old Wynn Macau.

The next major impact to the Macau market is expected to take place by December, when MGM Mirage opens the $1.1 billion MGM Grand Macau.

"While the construction boom is well under way in Las Vegas, the market's performance abroad intrigued investors," Gordon said. "The two most-heavily invested Las Vegas-based operators in Macau, China, contributed the bulk of the sector's aggregate increase."

Wynn Resorts surprised Wall Street with its second-quarter earnings, which reversed a net loss from a year ago and were almost double what gaming analysts had expected.

However, Bear Stearns gaming analyst Joe Greff lowered his ratings on the company's stock last week, believing the increase after the earnings announcement has accounted for the company's fundamentals.

"At current levels, investors are capturing the full value of current efforts in Las Vegas and Macau as well as a great majority of the future development pipeline," Greff said in a note to investors. "Our decision to take profits here, despite the timing, is not at all impacted by or related to the opening of The Venetian Macau, as we continue to believe the market will handle the new capacity and Wynn Macau will continue to generate strong returns."

Shares of Bally Technologies rose considerably in value after the company told Wall Street it expected earnings in fiscal 2007 would reverse a net loss from 2006. The company's stock priced average $28.53 on the New York Stock Exchange in August, almost 5 percent higher than in July.

Sands, Wynn get boost from Macau is republished from