And although I am skeptical of investing in Chinese state-owned companies, Melco is a privately owned company that is truly thriving by exploiting one of the biggest opportunities in Asia.

While Las Vegas is still struggling to get back on its feet in the aftermath of the Great Recession, 2011 gambling revenue in Macau rose a whopping 42% to a record $33.47 billion — a figure that is nearly five times greater than 2011 revenues on the Las Vegas strip.

Melco is one of six licensed Macau casino operators. But unlike its other competitors, 100% of Melco Crown’s revenues are derived from Macau. Melco also is controlled by Lawrence Ho, son of local tycoon Stanley Ho and member  of one of the region’s most powerful families. That makes Melco a local player with a leader who knows the rules of the game in a rough-and-tumble business environment.

In June 2011, Melco acquired a 60% interest in Macau Studio City, which is shaping up to be the premier gaming spot in Macau when it opens in three years, thanks to its location.
The casino will be located right next to the Lotus Bridge immigration station, making it the first and most visible casino on “the strip.”

As a result, Melco stock was hit hard this past summer on fears of a dilution of existing shareholders to finance this major development. But with roughly $1 billion of cash in the bank, the company’s management has assured investors that Macau Studio City will be funded strictly out of cash and ongoing cash flow. Since then, Melco’s stock has been making a gradual recovery.

Recent financial results for Melco confirm its remarkable growth rate. For the nine months ending Sept. 30, 2011, Melco reported net revenue of $2.8 billion. That’s a 90% increase in revenues compared to $1.9 billion during the same period in 2010. Net income hit $187.1 million. That equates to $0.35 per ADS compared to a net loss per ADS of $0.05 for the comparable period in 2010. When the company announces its next set of earnings on Feb. 20, I expect earnings to hit $0.50 per ADS for all of 2011.

The recent pullback in the stock makes it a good time to buy. In the interest of full disclosure, I also want you to know that I hold MPEL for my clients at Global Guru Capital.

Moody’s Investors Service put its ratings on MGM Mirage (MGM) on review for possible upgrade after the casino operator said it is trying to extend the maturity dates on $5.55 billion of credit lines to 2014 from next year.

Moody’s vice president Peggy Holloway said an extension “would be a positive step forward for MGM with respect to near-term financial flexibility as well as its longer-term ability to remain viable as a going concern.” The proposed amendment also would allow the company to issue more secured debt, which could be used to refinance other borrowings.

Moody’s–which rates MGM at Caa2, or two steps into highly speculative territory–said any upgrade likely would be modest because of the company’s high leverage, challenging operating environment and possible difficulty in closing condominium sales at CityCenter, its recently opened hotel-retail-and-condo development on the Las Vegas Strip.

Among the issues the rating agency will consider in its review are specific terms of MGM’s amendment, the operating environment in Las Vegas, the potential sale of the company’s interest in the Borgata casino in Atlantic City, N.J., and its possible initial public offering in Macau.

In November, MGM said it swung to a third-quarter loss as it took a $1.17 billion write-down on its $8.5 billion CityCenter project, but Chairman and Chief Executive Jim Murren said results continued to improve from earlier in the year.