Macau betting with the billionaires

Ask casino owners if they gamble and the answer is no. They know the odds! It's much better owning a casino then gambling. In a down market many casino shares are up. After a tough 2015 caused by the anti-corruption crackdown in China it seems that lady luck is on their side. Some billionaires are doubling down. Steve Wynn of Wynn resorts has gone on one of the biggest insider buying sprees I have ever seen. Buying 1 million shares for $63.8m in December (real money even for a billionaire.) He then spent another $32m in January for 572,850 shares and $15m for 258,523 shares in February. It seems that Macao is making a bottom he's put his money where his mouth is.

Wynn's conference call "management is great"

Commentary from casino magnates is always entertaining. The question on why he bought so much stock. "My view is that I like Wynn Resorts especially because I think the management is great." He also mentioned that " January in Macao was the "best month in a long time." Other random comments on the call "only an Irishman would call a $1.5 billion hotel a joint. See how relaxed everybody is in this company? He might be a little biased but putting in nearly $100m to back himself is working out the stock is up 15% year to date.

Must see attractions in  Macao
Las Vegas Sands, Melco Crown and Wynn are exposed to Macao. Las Vegas Sand's Venetian is the highest grossing Macao property exceeding $1 billion plus in EBITDA in 2015. The only property that exceeded it globally was one of LVS's other properties Marina Bay Sands in Singapore. The founder Sheldon Adelson is also calling a bottom based on "well if you look it's just 70 years of experience that I have in business."

Downtown versus the strip
These companies will benefit as Macao shifts from the Pennisula to the Cotai Strip. Sheldon quoted that visitation in Cotai is now 60% whereas it used to be 100% to the Peninsula. It's a bit like downtown and the strip in Vegas. The strip is where all the non-gaming facilities are its the place to be.

Lady luck on Macao's side
Signs are improving for diversified casino operators. Melco Crown's Studio City was initially allocated 200 tables a disappointment to some but they received an additional 50 tables in January in recognition of their non-gaming attractions. It's a big deal as each table can be expected to bring in around $10,000 a day. 4 new casinos will open up in Macao this year (Macao had nearly 3 years without a new resort). The increase in supply creates more competition but it also helps to increase the Cotai's appeal over the pennisula. Las Vegas Sands and Melco Crown properties are well positioned on the strip.

For all the doom and gloom in Macao it is still the only region in China where gambling is legal. It is a market oligopoly only 6 gaming operators have access to this market. A scare market with billionaires betting on themselves sounds like better odds than gambling at a casino.

Decisive is long Las Vegas Sands (LVS) and has no position in Wynn Resorts (WYNN) or Melco Crown (MPEL). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.