Now an interesting thing happened a few days ago, the very shrewd Steve Wynn did a secondary offering raising nearly $700 million.
I am harking back to other very shrewd people and did a Google search on Sam Zell and Steve Schwarzman, and found a blog entry by The Peridot Capitalist back in June 2007 during the IPO of Blackstone Group (BX).
- Zell sold his stake in Equity Office Properties (EOP) - which turned out to be the peak for the commercial office market.
- Schwarzman sold his stake in Blackstone Group (BX) - which turned out to the peak for the private equity boom (ask shareholders unfortunate enough to buy a stake in BX near $38, current price $26, after falling to $21)
- Is this the next one? If one man knows casinos its Wynn. Is he saying, hey people - yes I realize 1.3 billion gamblers will arrive on our shores soon enough but this valuation you gave my company is a bit over the top and frenzied.
Folks, Wynn Resorts (WYNN) was a $100 stock 60 days ago, its up 70% touching $170 of late. Las Vegas Sands (LVS) was $95 and peaked at $145 yesterday, up 53%. (laggard!) Even sad sack Melco (MPEL) which could not get out of the way of itself for the first 8 months of its public existance (IPO $23, down to $11 by mid summer) is up 46% as investors chase "worst of breed".
I don't have a stake in this area, but watch it closely as it represents what this fund is all about - a sea change, a big long term opportunity but at this point the price of these stocks have reflected this opportunity (and more) for the near term. Is Wynn telling us what Zell and Schwarzman did? That they will (smartly) take advantage of the sweating panting unwashed masses who group think and drive valuations past the point of sense? Technically there is a LOT of air in between current prices and any meaningful support in these charts.
I can't short in this fund, but if I could.....
No positions
3 comments:
Good call here. LVS, WYNN are down 9-10% and MGM is down 3% on reports that Macau's gaming revenue growth was less than expected (55% in August versus the high expectations of 75%+) although there is disputes about whether this number is really accurate or not.
Thanks, need to go read that. I've been doing way too much TYPING today. No one disputes the long term growth is there - but it just looks like the market is extrapolating everything to 1.3 billion people.
These have to be the busiest 1.3 billion people in the world - when they are not gambling, they are buying fashion goods, when not buying fashion goods they are buying jewelry, when not buying jewelry they are eating, when they are not eating they are buying drugs, or financial services, or apparently designed new architecture or mining ... can't keep up. All I know is these are the busiest people in the world as every company in the world thinks these 1.3 billion people will be their consumer.
Poor Indians sitting in the corner all ignored. I guess 1 billion people doesn't count for much these days.
In the last few years Macau has experienced rapid development that is transforming it almost beyond any resemblance to its former character as a rather somnolent and picturesque artifact of Portuguese colonialism.
The international airport and the economic growth of the region have
created new opportunities for the tourism industry and 'The big six'
will all shape the future of Macau as a tourist destination. For a
tourism destination, the purpose of revenue management is to maximize the amount and minimize the risk of tourism revenue.
There will be a fight in the future for non-gaming tourists from Hong Kong and other more affluent places in China. This fight will change Macau's current market position as a gamblers' only destination to
more of a Gambler/shopper/sightseers destination.
They used to call Macau the Monte Carlo of the Orient now it is
starting to be called the Las Vegas of Asia. In Las Vegas more than 50% of the revenue comes from non-gaming now. Who is best suited to fit the future needs? Sjm, Galaxy, Wynn, Lvs,
Mgm or MPEL? Remember there is only six companies to serve the 1.3billion Gamblers.
MPEL will distinguish itself from other competing destinations by
providing differentiated gaming service products and tourist
attractions. MPEL has started this by enhancing its traditional VIP
room operations is an effective way to differentiate itself from the competition.
Implementing such a revenue management strategy is only one
improvement in the 3-Prong attack, MPEL will be able to preserve its
risk-taker market and minimize the revenue risk posed by upcoming
competition in the region better than anyone else.
Just not having to report every 'win' over $1200 dollars and
transactions over $10,000 to the IRS is another big advantage for
MPEL. One of the only reasons MEPL sp is so low now is the fact they
have run out of money and had to file a secondary...this fact coupled with the bank credit tightening and cost overruns and delays opening the Crown have pushed it way down. I'm not saying the bad news is over but things are looking up from here and if you are a long term investor these things will all get settled and the price shall go far
beyond IPO levels.
Big things are coming down the road. I can see 2% of the float for a Chinese IPO which should more than cover 2 or 3 more casinos down the road. But today the cash is short to build the third casino -- about
400M. Let's hope some new cash infusion from alternative sources like pre-sales of condos help deter the costs. MPEL is not off the rocks yet.
On a slight positive note the parent of MPEL is in the process of a stock buy back of about $250M. The Mocha Clubs have made an exclusive deal the DigiDeal on dealerless table games.
My prediction now is 15.50+ before year end and 40+ by end of 2009. I look at any downturn from here a great op to buy.
Sources: http://finance2.finanmart.com/2007/08/melco-pbl-entertainment-q2-2007.html
http://www.dsec.gov.mo/e_index.html
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