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Moody's bullish on Vegas gaming companies

18 Nov 2011

By Howard Stutz
LAS VEGAS, Nevada -- Moody's Investors Service on Thursday upgraded its opinion of the three Nevada-based gaming companies that operate casinos in Asia, saying gaming markets in that region of the world will continue to flourish.

The ratings agency said the prospects for potential earnings for MGM Resorts International, Las Vegas Sands Corp. and Wynn Resorts Ltd. are improved because the companies have lucrative locations in Macau.

Improvements in the Las Vegas gaming market also help all three companies, but Las Vegas Sands benefits from having one of only two casinos in Singapore.

Macau, however, is the key market.

"Moody's currently expects annual year-on-year growth of between 15 percent and 25 percent in Macau gaming revenue, supported by continued credit for high-rollers, increased spending by mass-market visitors, primarily from mainland China, and a cap on gaming tables until 2013," analyst Keith Foley said in a research report.

Las Vegas Sands has become dependent on gaming in Asia.

Macau accounts for about 50 percent of Las Vegas Sands net revenues and 45 percent of the company's cash flow. The Marina Bay Sands in Singapore accounts for 32 percent of revenues and 42 percent of cash flow.

The company's Strip and Pennsylvania casinos only account for about 18 percent of revenues and 13 percent of cash flow.

"With respect to Singapore, Moody's expects that market will maintain a double-digit year-over-year growth in gaming revenues helped by limited competition locally and within the region," Foley wrote.

Las Vegas Sands had about $10 billion in long-term debt as of Sept. 30 .

Meanwhile, MGM Resorts owns 51 percent of the MGM Grand Macau after the initial public offering on the Hong Kong Stock Exchange in June.

Moody's believes continued earnings from the property might increase the likelihood of a dividend distribution, which the ratings service believes would help improve the company's liquidity profile.

"The rating also reflects Moody's view that positive lodging trends in Las Vegas will continue through 2012 and will help improve MGM's leverage and coverage metrics modestly," Moody's analyst Peggy Holloway said in a report.

MGM Resorts had roughly $13.6 billion in long-term debt as of Sept. 30.

The ratings service said the combination of Macau and positive trends in Las Vegas could help the company access capital markets and address debt maturities in 2012 and 2013.

"Despite several years of a weak U.S. economy and volatile capital markets, MGM has been able to gradually improve its debt maturity profile," Holloway said.

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