Wynn Resorts Fueled by Continued Macau VIP Growth
Wynn Resorts (NASDAQ:WYNN), which operates luxury casino and resorts, is seeing increasing turnover from VIP table games at its affiliated resorts in Macau. Wynn opened Encore at Wynn Macau, an all-suite boutique hotel, last year to supplement its operations at the Wynn Macau resort. It also expects to complete another project on the Cotai Strip by 2014. These initiatives should provide a catalyst for further growth of Wynn’s gaming operations in Macau. Wynn competes with other casino companies like Las Vegas Sands (NYSE:LVS), Melco Crown Entertainment (NASDAQ:MPEL) and MGM Resorts (NYSE:MGM).
We estimate VIP table games in Macau account for roughly 28% of Wynn Resorts’ equity value. Wynn’s VIP table games turnover from its Macau operations has increased from $4.8 billion in 2006 to around $55 billion in 2010, and we expect the turnover to rise steadily with a growing number of Chinese high net worth individuals (HNIs) and increasing baccarat volumes.
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While we expect Wynn’s Macau VIP table games turnover to reach $130 billion by the end of our forecast period, Trefis community members predict the turnover will hit $150 billion, representing potential upside to our price estimate for Wynn Resorts’ stock.
We currently maintain a $117 price estimate for Wynn Resorts, in line with market price.
Increasing Number of Chinese HNIs
VIP gaming currently represents two-thirds of Macau gross gaming revenue. [1] According to a Cap Gemini-Merrill Lynch Private Wealth report in 2009, wealth of Asia Pacific’s HNIs is estimated to grow at an annual rate of 8.8% until 2018, faster than the global average of 7.1%. China’s HNI population reportedly outpaced that of the U.K. in 2009 to become the fourth–largest in the world. [2]
Upsurge in VIP Baccarat Volumes
VIP Baccarat (a card game in which two or more players gamble against a house “banker”) is phenomenally popular in China. In 2010, it generated revenues of nearly $17 billion, accounting for 72% of the casino sector’s overall revenue. In 2010, it recorded a 70% YOY jump according to official data from the Gaming Inspection and Coordination Bureau.
See our full analysis and $117 price estimate for Wynn Resorts
Trefis Community Forecast
Trefis members expect Wynn’s VIP table games turnover to increase from $55 billion in 2010 to roughly $150 billion by the end of our forecast period, compared to the baseline Trefis estimate of an increase to $130 billion during the same period. The member estimates imply a small upside to our $117 price estimate for Wynn Resorts’ stock.
Notes:- Booming Chinese middle class to boost Macau mass market, Macaubusiness.com, Jan 14, 2010 [↩]
- Capgemini Press Release, June 24, 2009 [↩]