As rivals bet on the growth of stateside gaming,

MGM Mirage

( MGG) has turned its eyes abroad, making sizeable international investments that could spur enormous growth. While the upside is great, so are the risks, with MGM Mirage's plans pinned to situations the casino cannot control.

In the U.K., the company wants to build a number of super-sized casinos in the coming years, but needs the Parliament there to deregulate gaming laws to do it. And in Asia, the casino wants to build on the island of Macau, a special administration region of China 40 miles west of Hong Kong, but it needs to find a partner to do it.

Even in a best-case scenario, neither market will affect earnings until 2006, but MGM Mirage's efforts are notable, especially for investors searching for a growth story that may not be factored into current stock prices. The moves are subject to so many variables that MGM Mirage won't even offer estimates or timetables yet.

"This is about long-term growth. I would feel uncomfortable putting specific years on it, but what we're trying to do is be in a position to take advantage of these opportunities as quickly as they come up," said Alan Feldman, senior vice president of public affairs.

Macau: Mini Las Vegas?

And the opportunities are huge. Macau is a market that already rivals Las Vegas despite being a fraction its size. According to Scott Fisher, managing director at gaming consultancy The Innovation Group, the island's dozen utilitarian casinos generated $3.5 billion in gaming revenue in 2003. In comparison, Las Vegas, which has 44 casinos on the Strip alone, generated $4.8 billion during the period.

Macau generates huge revenue from such a small base because it's a haven for hardcore gamblers who prefer high-stakes baccarat to slot machines. As a result of the focus on table gaming, Macau's average daily table win is $21,500, about 10 times more than Las Vegas'.

"For anyone to get in there would be a very lucrative venture," said Daniel Davila, gaming analyst at Sterne, Agee & Leach, a New Orleans-based brokerage. "If you've got 1,000 tables at $20,000 a day times 365 days a year, that's $7.3 billion in revenue. You're talking otherworldly potential here."

Given that a 1,000-table casino is highly unlikely and MGM Mirage will have to split revenue under a joint venture, the company will not be pulling in that kind of money. And, as Fisher points out, "once you have a massive buildout, the average table win will come closer to the Las Vegas average."

Making Up for Lost Chances

MGM Mirage lost a chance to break into the Macau market in December 2002, when China put three casino licenses up for sale and opened the market to foreign investment. For the previous 40 years, all gaming was controlled by Stanley Ho, an octogenarian billionaire who heads the Sociedade de Turismo e Diversoes de Macau, better known as STDM. By breaking Ho's monopoly, China hopes to transform Macau from a rough-and-tumble hotbed of crime, sin and vice into a leading Asian leisure destination.

Although it was considered a favorite, MGM Mirage's bid finished fifth. Ho, who owns most of the island's real estate and accounts for 60% of the taxes Macau generates, won one of the licenses.

Wynn Resorts

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won another and Galaxy Casinos, a consortium between Sheldon Adelson, owner of the Venetian Resorts, and Hong Kong partners, took home the last.

Despite the setback, MGM Mirage has spent much of the last year negotiating with one of Ho's companies to form a joint venture. In early February, Hong Kong newspapers reported the casino had reached a $566 million development deal with Pansy Ho, the businessman's daughter, to build a casino. MGM Mirage said such reports were premature.

"We've had conversations with Pansy Ho about possibly jointly developing a project there. Those conversations are ongoing and it really isn't appropriate to discuss the details, it's just too early," said Feldman. "But at such point that they're finalized, we'll make an announcement."

For MGM Mirage, Macau represents a potentially massive return on investment in an underserved market that lacks the entertainment, shopping and amenities for which its brand is well known.

"Macau is located right in the heart of Asia," said Feldman. "It is virtually central to some of the largest cities in terms of population and given the appropriate level of investment in hotels and resort amenities, it could easily, and very quickly, become the centerpiece of travel and tourism throughout that part of the world."

But there are risks for American casino operators that build in Macau. If caught working with criminals, companies could run afoul of U.S. gaming authorities and could ultimately run the risk of losing their license. This is a real concern for the casino operators, which must perform extensive background checks before forming partnerships on Macau, where criminal activity apparently still occurs in the open.

"Once you get to Macau, unless you have access to credit, there is no way to get large sums of cash, even if you have the wherewithal to back it up," said Fisher. "Right now, you have loan sharks hovering over the tables, almost literally."

Last week the Macau legislature approved a law to stop this, letting casinos provide players with credit. It's expected to take effect in a few weeks and could help give MGM Mirage's negotiations a boost, eliminating a potential legal concern.

The Global Gamble

Macau is part of MGM Mirage's aggressive bet on the global spread of gambling, with the company moving to divest noncore assets to focus on potentially lucrative markets outside the U.S. The casino operator recently sold its Golden Nugget assets for $215 million and the MGM Grand Australia for $150 million. It has announced a number of deals to build casinos in the U.K.

The casino spent nearly $500 million to buy Wembley, a U.K. gaming firm, in late January, and has announced a number of joint ventures to build casinos on par with Las Vegas, which would be a first for the U.K. The company's joint-venture plans include a sprawling casino complex adjacent to the Meadowhall Shopping Centre, another near Newcastle United's soccer stadium and a 300,000 square foot casino paired with the mammoth Olympia exhibition center in London.

But as with Macau, these plans are still hypothetical. MGM Mirage cannot build until the U.K. deregulates its archaic gaming laws, an ongoing debate since 2001. The deregulation effort has picked up some steam in the last year, but legislation isn't expected to pass this year and may not pass until 2006, which only pushes back casino construction and delays MGM's growth potential.

"It's not going to happen in 2004," said Fisher, noting that the political support is there, but the urgency is not. "It's all but a done deal, but I don't think they'll address the deal this year. Maybe the announcements will bring the issue to the forefront, but the thought is that 2005 and 2006 are the years that we move forward."

Ultimately, the biggest risk for MGM Mirage is that it will lag peers in the near term, waiting for its plans to come to fruition. Rivals like

Caesars Entertainment

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,

Station Casinos

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and

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have been making deals to capitalize on the rise of Native American gaming, the lucrative Las Vegas locals' market and the general spread of gaming in the U.S.

But for MGM Mirage, it's a gamble worth taking -- even if it doesn't pay out immediately.

"Right now, it's a pretty mature industry and we don't see tremendous growth opportunities

in the U.S.. That doesn't mean there are none," said Feldman. "But there certainly aren't the kind of growth opportunities that you are seeing develop in places like Macau and the United Kingdom. Those would be far and away the two biggest."