Published: July 15, 2010

Las Vegas is full of tales of the "good old days."

One of the more fascinating is a story that allegedly took place back in 1969. The story goes that Frank Sinatra told every Las Vegas casino owner they either bought their liquor from a buddy of his, or Frank would not play their hotel.

When Frank Sinatra spoke, people listened. Many of the casinos in town starting buying their booze from Frank's friend, Stephen, who had moved to town just a couple of years earlier.

Backed with Sinatra's endorsement, Stephen's distribution deals helped him hit the big time, even though the country was dealing with a recession. Shortly thereafter, he was able to take his profits and buy an interest in the Golden Nugget casinos in both Vegas and Atlantic City.

By 1973 the former liquor distributor acquired a controlling stake in the Golden Nugget, making him the youngest casino owner in the country. Around that time, a nasty 16-month recession hit, but Stephen was able to power through. He took on more casino assets, surviving the 1980-82 recession, and the savings and loan-triggered recession of 1990-91, which occurred just after opening his trailblazing Mirage resort on the Las Vegas Strip.

If you know much about Las Vegas history, you should have a good idea that "Stephen" is more commonly known as Steve Wynn -- CEO and Founder of Wynn Resorts (Nasdaq: WYNN).

Through every bust and boom cycle, Steve Wynn has not only been a survivor, but an increasingly wealthy man. When he finally sold off his casino assets in 2000 to MGM Grand, he became a billionaire. Shortly thereafter, he opened Wynn Resorts.

We now find ourselves here again, in a recession. Anybody want to place a bet on how Steve Wynn will come out of it? I believe history will repeat itself, and Mr. Wynn -- and shares of WYNN -- will come out shining, just like always.

First, the company enjoys a rock-solid capital structure. Steve Wynn said in an interview with CNBC that he did not want to go public with Wynn Resorts being more than 60% leveraged in relation to its capitalization. He wanted to make sure he would have enough liquidity to be able to upgrade the resort every five years, so it would remain competitive with the ever-changing landscape of Las Vegas.

Wynn's been around long enough to know that there's a constant boom-and-bust cycle. He wanted to make certain he was not overleveraged so that the company could survive the inevitable bust portion cycle. When his IPO failed to net him the $1 billion in equity he wanted, he and his partner put up the rest of the cash.

The result is that Wynn Resorts now sits on only $3.3 billion of reasonably priced debt, representing just 29% of its enterprise value, while competitors Las Vegas Sands (NYSE: LVS) and MGM Mirage (NYSE: MGM) struggle under $10.1 billion and $12.7 billion of debt, respectively -- representing 46% and 76% of enterprise value. MGM Mirage is, in fact, fighting off creditors to remain solvent.

Meanwhile, because business is tough in Vegas and Mr. Wynn is unhappy with the Obama administration's approach to the economy, he is electing to spend more of his time working on his operations in Macau (A few weeks ago, Wynn went so far as to say "Macau has been steady. The shocking, unexpected government is the one in Washington). Focusing more on Macau (the Chinese equivalent of Las Vegas) is a sound strategy, as the casino town saw gaming revenues rise +57% in the first quarter, according to Bloomberg.

But that doesn't mean he's ignoring the company's Las Vegas properties.

Mr. Wynn is still doing what he would do anyway: taking bold moves to make his resort more attractive -- recession or not. Some might think an upgrade during a recession is a bad move, but that ignores Mr. Wynn's experience in becoming one of the most powerful names in the casino industry.

For example, unhappy with the view from the entrance at his Encore property (construction on another casino halted across the street, leaving a view of unfinished buildings), the magnate tore down its $13 million entranceway just three months after completion. At the same time, he has used the space to create the $69 million Encore Beach Club at the resort.

This isn't some capricious, spendthrift move. Steve Wynn has always been on the cutting edge of Vegas trends (he started the trend toward mega resorts on the Strip by building the Mirage). Wynn believes the world of interactive entertainment has changed how folks in the 22-40 age range experience entertainment. They are not content to sit and watch. They want to be immersed in an experience. Also, visitors in this demographic are more likely to have no mortgages, no kids -- and plenty of disposable income. With this in mind, Encore's Beach Club caters to these desires.

The beach club's revamp also targets men aged 50-70, who Wynn believes will avoid growing old at any price. They want to be around this youthful energy, and they will pay for it.

Action to Take --> Steve Wynn has survived in Vegas this long because of his 40 years of experience and making bold, smart moves. It shouldn't be a surprise then that the company's first quarter showed a profit of $27 million, while competitor MGM lost nearly $100 million.

Wynn and his ex-wife wife also own nearly 20% of the company. With their interests aligned with shareholders, I think there's no better buy in Vegas than to go with Wynn. With the stock still -50% off its pre-recession high, investors have a chance to scoop it up and possibly double their money over the next five years.

-- Frederick Steier
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