LVS is the most significant firm using a $36.four billion marketplace capitalization, and the smallest is MGM with $5.2 billion. Amongst the 4, WYNN could be the most leveraged company with D/E of a lot more than 15x; however, the interest coverage of 4.5x implies that WYNN can comfortable spend interest expense with its operating revenue. LVS has one of the most conservative and strong balance sheet having a 1.1x D/E ratio, plus the highest interest coverage of 8.4x.
Among the four, LVS and WYNN derived the majority of its revenue from casino operations in Macau. For LVS, out of $9.four billion revenue in fiscal year 2011, $7.four billion was from casino operations; accounting for 75.4% of total revenue, and out of that $7.four billion, $4.26 billion was from Macau, accounting for 57.6% of total casino income. And for WYNN, the total fiscal 2011 income was $5.27 billion, with all the casino revenue of $4.19 billion, accounting for 79.5% of total revenue. A big chunk of casino revenue was from Macau operation also, of $3.57 billion, accounting for 67.7% of total income. LVS also has a big operation in Singapore using the Marina Bay Sands, and this operation brought for the organization revenue of $2.36 billion, accounting for 31.8% of casino revenue in fiscal 2011.
For MGM, the company’s most important operation is within the US, with 75% revenue from the domestic resorts. The rest was from MGM China’s operation. Its income segments seemed to spread out much more evenly amongst the revenue of casino, rooms, food & beverage and entertainment. Out of nearly $5.9 billion domestic income, MGM had nearly $2.five billion coming from casino operations, accounting for only 42.4% of total domestic sales. The company, which had probably the most percentage casino revenue out of total sales, was Melco Crown, with $3.68 billion out of $3.83 billion total, accounting for as high as 96%. And Melco’s primary operation is solely in Macau, including City of Dreams, Altira Macau, Mocha Clubs and Taipa Square Casino.
The US gaming industry has slowed down, giving its golden time to Macau. In order to “surf” the casino growth in Macau, investors should consider LVS, MGM or especially Melco, not MGM as the majority of MGM’s revenue was from domestic resorts. MGM is expanding in China, Macau but I think it would take quite some time. LVS seems to be the best for investors when we take into considerations of both operating performance and leverage level. However, it is also essentially the most expensive with 25.6x P/E. WYNN was significantly leveraged and still expensive at 22x P/E. That leaves us Melco, conservatively leveraged, good operating margin, comfortable interest coverage, and reasonably priced at 17.9x P/E. With the primary operations in Macau, I personally think Melco is a stock for investors to surf the growth inside the Macau casino industry.