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Wynn's Latest Move Threatens Boyd, MGM

Wynn Resort's announcement to move into Pennsylvania may put pressure on the Atlantic City market.



) --

Wynn Resort's

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plans to move into the Pennsylvania market will likely serve yet another blow to Atlantic City and its casino operators.

In particular, Wynn will put pressure on the higher-end of the market, J.P. Morgan analyst Joseph Greff says -- which, in Atlantic City, means the Borgata. This would be a negative for

Boyd Gaming

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, which owns a 50% stake in the hotel-casino. It will also increase

MGM Mirage's

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difficulty in potentially divesting its 50% stake.

Already, it has been discussed that MGM may have a hard time finding a buyer willing to pay its asking price, as Atlantic City becomes a less viable area for growth.

For Wynn, however, going into Pennsylvania is a smart one. The company said on Tuesday that it has entered into a letter of intent with Philadelphia Entertainment and Development Partners that would make Wynn the manager of a casino project that is slated for the Philadelphia waterfront.

The agreement must be approved by the Pennsylvania Gaming Board.

If passed, Greff assumes that this would make Wynn the majority owner, with the prior investors' retaining some minority stake. "We believe Wynn was brought in given its strong brand and operating prowess, as well as its strong capital position," he wrote in a note.

While no details were provided on the casino, Greff says it could open by the end of 2012.

"If we were to assume a $600 million project cost, a 70% stake for Wynn and a 20% to 25% estimated cash return and a management contract where Wynn gets 2% of revenues and 5% of EBITDA, we think this could add an additional $2 to $6 to incremental value per share," Greff wrote.

Wynn is scheduled to report its fourth-quarter earnings today.

Currently, both

Las Vegas Sands

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Penn National Gaming

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have operations in the state.

-- Reported by Jeanine Poggi in New York.

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