Don’t Let Wynn Lawsuit Scare You Away From Gaming Stocks

Wynn Resorts (NASDAQ: WYNN ) own vice chairman, Kazuo Okada, who indirectly
owns 20% of the company, filed suit against Wynn so he could get a look at its
books. Allegedly, hes been stonewalled from doing so, and hes asking about a
$129 million donation to the University of Macau and $30 million Okada gave to
the company to develop a Macau casino. Does the lawsuit have merit? Who knows?
Should you care? Probably not. Its entirely possible that something will get
uncovered in the lawsuit. It doesnt take much imagination to think what, uh,
incentives the Chinese may have wanted to let an American build a casino in
Macau. But Stephen Wynn is a Vegas legend and a survivor, at that. I dont think
hell come out of this too badly. If anything, it just helps makes his companys
stock all the cheaper. The stock is back to levels not seen since the end of
2010, and is attractively priced. Macau continues to provide huge revenue for
all the gaming stocks, and Wynn is no exception. Although earnings this year are
projected to grow 13%, analysts have a 40% annualized growth rate for the next
five years. I think thats a tad optimistic, but even if you chop that in half, a
20 P/E on 2012 earnings of $6 per share yields a $120 price tag. Add 20% growth
to that each year and it makes Wynn a solid buy. Wynn also has a great balance
sheet, with $1.7 billion in cash against $2.93 billion in debt. That debt number
also has been decreasing consistently over the past several quarters. Las Vegas
Sands (NYSE: LVS ) also is looking attractive. It does carry a hefty debt load
of $9.2 billion, and came off a horrible 2009 loss of $540 million before
chalking up a $407 million 2010 profit. It already has racked up a $950 million
profit in the first three fiscal quarters alone, so the possibility of tripling
2010s numbers is strong. Earnings are pegged to grow 25% in 2012, and 38%
annually thereafter. It trades at 22 times 2011 earnings and only 18 times 2012
earnings. With 49% insider holdings, managements interests are very much aligned
with shareholders. The stock looks like a buy to me at these levels. As for MGM
Resorts International (NYSE: MGM ), a bet on this stock is like betting on a
six-game football parlay. The company had the misfortune of undertaking the
massively expensive CityCenter project right when the financial crisis hit. MGM
took on enormous debt for this project. Right now, that debt stands as $13
billion, with a comparatively meager $1.8 billion of cash on hand. The company
lost more than $1 billion in 2009 and 2010. It has stemmed its losses this year,
but there still is red ink to be had. While MGM has pushed off its debt maturity
dates so bankruptcy is not immediately likely, I dont see how it will turn
things around. In fact, I don't know why the stock is even at $11. Maybe some
investors are hoping the roulette wheel will stop with the marble right on that
one particular number they chose. As of this writing, Lawrence Meyers did not
hold a position in any of the aforementioned stocks.