Put the Odds in Your Favor With This Casino Operator

Dan Wasiolek: Wynn Resorts (WYNN) might best be known for its luxury casinos in Las Vegas, but the key growth driver comes from the Macau region where it derives 60% of its profit.

Wynn is a narrow-moat company trading at a large discount to our fair value estimate, and we recommend investors consider shares.

Both Macau gaming revenue and Wynn's share price have declined in the past two years, as anticorruptive measures taken by the Chinese government have impacted visitation and spending. However, Wynn shares have begun to rebound as signs of stabilization in the region emerge.

Helped by new casino openings, Macau visitation has shown slight improvement in the last few months, while the Chinese New Year this February resulted in some lift to industry growth. Further, Wynn noted that January was its best month in a long time, and we highlight that the company's gaming volumes showed improvement during the last three months of 2015.

We remain confident in the long-term Macau growth opportunity, given significant infrastructure investments being made by the government, which support a population in near proximity that is seven times that of Las Vegas.

We see Wynn as best positioned to benefit from this longer-term growth, as its room share in Macau increases to 9% from 6% currently with the opening of its Cotai Palace casino this summer. Aided by Palace, we expect Wynn's growth in Macau to nearly double the mid-single-digit annual sales growth we project for the Macau industry over the next few years.