Macau Shifts Its Attention to Cotai

For years we've been anticipating a real shift of gaming revenue from the Macau Peninsula to Cotai in Macau. But for years, casinos in the old part of town have more than held their own against new competition. But two new resorts appear to be changing the picture, and it's starting to show in financial results.

Two weeks ago, Las Vegas Sands (NYS: LVS) showed that it was holding its own on Cotai after the opening of Galaxy's new casino. Sequentially, Venetian Macau saw EBITDA fall 0.5% and Four Seasons had a 7.1% increase. Today, Melco Crown (NAS: MPEL) announced earnings and City of Dreams saw a 6.1% increase in EBITDA sequentially and a 130.2% increase from last year.

This is in stark contrast to a 5.4% decline in EBITDA at MGM Resorts (NYS: MGM) Macau casino and a 7.4% decline for Wynn Resorts (NAS: WYNN) from last quarter in Macau. The money is flowing to Cotai, and Melco Crown is able to capture value without putting in another table or hotel room.

This shift to Cotai should continue with Sands Cotai Central now open and a number of choices now available to gamblers. When Wynn, MGM, and SJM open on Cotai in a few years, Cotai will be a must-have spot for each of these companies.

Melco's looking attractive
Melco Crown is often the forgotten operator in Macau, with Las Vegas Sands and Wynn getting most of the headlines. But the company now has an enterprise value-to-trailing EBITDA ratio of just 9.0, better than either of its competitors by more than 2 points (without projecting Sands Cotai Central).

City of Dreams has steadily been improving, and with gaming shifting to Cotai, the resort's financial performance should steadily get better.

Melco may not put up the flashy numbers of some of its rivals, but it is one of the most attractive companies in the gaming space. Next week I'll cover the major players and make my top gaming-stock pick after the first quarter's results.

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At the time this article was published Fool contributorTravis Hoiumhas no position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdings, or follow his CAPS picks atTMFFlushDraw. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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