Forget earnings, check the company's credit score

Jun 2, 2009 5:06 PM
by Ray Poirier | It used to be that investors looked at a company’s earnings to determine whether it might be a good investment. Now, at least with gaming companies, the criterion seems to be debt.

During the past year, Las Vegas has seen investors flee in droves from some of its principal casino owners. Debt has crippled the likes of MGM MIRAGE Inc. (MGM), the operator of the largest number of casinos on the Las Vegas Strip. It has mangled the operations of Harrah’s Entertainment Inc., Las Vegas Sands Corp. (LVS) and Station Casinos.

Boyd Gaming Corp. (BYD) had to mothball its planned development on the site of the former Stardust Hotel/Casino, while construction of the Cosmopolitan and Fontainebleu projects have been seriously hampered.

So what’s left? Wynn Resorts Ltd. (WYNN) says Robin Farley, chief gaming analyst at UBS.

Why? Not because of improving business in Las Vegas, which she believes will be down significantly during the coming months, or even Macau, which has been a primary source of profits for the company.

It’s Wynn’s balance sheet, she says.

She says that the company has no debt payments due in 2009 and only a little due in 2010.

In her view, getting a good operator as well as a solid balance sheet in these troubled times provides hope for the future.

Obviously not all analysts agree with Farley’s assessment. A competing analyst sees little progress in either Las Vegas or Macau, the two markets in which Wynn Resorts operates. He warns that the current share price of WYNN could fall 30 percent.