Per media reports, Wynn Resorts, Limited (WYNN - Free Report) has made an offer to purchase Australia’s leading casino firm — Crown Resorts Ltd — for A$9.99 billion ($7.12 billion). The proposed deal indicates a premium of above 26% based on the company’s Monday’s closing price.
Following the news, shares of Wynn Resorts gained 2.8% on Apr 8. Also, the stock has surged 30.8% in the past three months, outperforming the industry’s 12.1% growth.
Crown Resorts stated that the talks with Wynn Resorts are at the initial stage and no agreement has been reached regarding the structure and value of the deal. However, Wynn Resorts has denied commenting on the same.
Why Crown Resorts?
Wynn Resorts is making an effort to expand its global footprint, especially in Asian markets, which have solid prospects. A slowdown in Macau can also be another reason behind the company’s intention to foray into such markets.
Moreover, Macau's Gaming Inspection and Coordination Bureau (DICJ) is increasing its audits of the junket industry on worries related to money laundering. This, in turn, might weigh on the company’s performance in the region. That said, recent numbers published by DICJ raised concerns for the short term. Meanwhile, a slowdown in China and the trade war between Beijing and Washington continues to impact casino operators in Macau.
Crown Resorts has already exited from the Macau business following China’s crackdown on the gambling industry. In fact, the crackdown on corruption in China compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macau. Consequently, footfall declined at the local casinos leading to a persistent decrease in gaming revenues.
We believe that Wynn Resorts will gain from the Crown Resorts buyout as the latter has a very strong foothold in Australia. Following the deal, Wynn Resorts will also benefit the most from a A$2.2 billion casino, which is being built on Sydney’s waterfront to attract high roller VIP gamblers.
Zacks Rank & Other Stocks to Consider
Wynn Resorts, which shares space with Melco Resorts & Entertainment Limited (MLCO - Free Report) , carries a Zacks Rank #2 (Buy). A few other prospective players in the same space include Las Vegas Sands Corp. (LVS - Free Report) and PlayAGS, Inc. (AGS - Free Report) . Both the stocks have the same rank as Wynn Resorts. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Las Vegas Sands have gained nearly 18% in the past three months.
PlayAGS has an impressive long-term earnings growth rate of 12%.
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