Wynn Macau Ltd. (1128), the unit of billionaire Steve Wynn’s Las Vegas company, won a land grant for its second resort in the Chinese city as surging revenue spurs expansion by casino operators in the world’s biggest gaming hub.
The Macau government approved a 51-acre concession on the Cotai strip for the unit of Wynn Resorts Ltd. (WYNN:US), the company said in a statement today. Wynn Macau shares were halted from trading in Hong Kong.
The decision clears the way for the company to add hotel rooms and gaming tables in a market where Wynn Resorts gets 72 percent of revenue (WYNN:US). Galaxy Entertainment Group Ltd. (27), Sands China Ltd. (1928) and Melco Crown Entertainment Ltd. (6883) also plan Cotai projects or expansions to draw more Chinese tourists.
“It’s certainly positive news for Wynn Macau,” said Grant Govertsen, an analyst at Union Gaming Group. “The completion is likely to be at least some three to four years away.” The investment will cost $2.5 billion to $3 billion, Govertsen said.
Wynn Resorts got 72 percent of its 2011 revenue of $5.3 billion from Macau, according to data compiled by Bloomberg. Wynn Macau accepted the terms of a draft land concession in September from the city government for about 51 acres in Cotai, according to its annual report. The casino operator paid an initial deposit of 500 million patacas ($63 million) in December.
Wynn Macau, which was halted from trading today, has climbed 28 percent this year in Hong Kong trading, compared with a 14 percent increase for the benchmark Hang Seng Index.
Asia’s Vegas Strip
Macau’s April gambling revenue increased 22 percent to 25 billion patacas, the Gaming Inspection and Coordination Bureau said. Billionaire Stanley Ho’s SJM Holdings Ltd. (880), gained as much as 3.9 percent, Galaxy Entertainment rose as much as 2.9 percent and Melco Crown Entertainment fell as much as 2 percent.
Wynn has said it planned to build a resort that includes a casino and about 2,000 hotel suites. Its existing casino opened in September 2006 on the territory’s peninsula.
Gambling companies are investing in resorts that combine shopping centers, entertainment shows and hotel rooms to draw Chinese visitors to Cotai. The strip of reclaimed land is envisioned by casino operators to be the Asian equivalent of the Las Vegas Strip.
Galaxy said April 26 that it plans to invest about HK$16 billion ($2.1 billion) to almost double the size of its Macau resort. Sands China last month opened the $5 billion Sands Cotai Central.
Macau is the world’s biggest casino hub, with $34 billion in gambling revenue last year, almost six times the $6.07 billion of the Las Vegas Strip, according to government figures.
Stanley Ho’s SJM, Asia’s largest casino operator, and MGM China Holdings Ltd. (2282) don’t have Cotai resorts.
“The Macau government has indicated that it is going to grant Cotai land approval for up to two casino operators this year,” Govertsen said. “Now Wynn Macau has secured one slot, meaning there is only one left for SJM or MGM.”
MGM China is the Macau venture between Ho’s daughter Pansy and MGM Resorts International. (MGM:US)
The latest approval comes as Wynn Resorts fights a legal battle with Japanese billionaire Kazuo Okada, who opposed the company’s HK$1 billion pledge in July 2011 to the University of Macau Development Foundation. The Universal Entertainment Corp. (6425) chairman and the former Wynn Resorts vice chairman filed a petition in state court in Clark County, Nevada, in January for access to financial records.
Wynn, based in Las Vegas, sued Okada in February and redeemed his 20 percent stake in Wynn Resorts saying he was “unsuitable.” Okada is challenging the redemption.
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