The voters in the city of Everett, Massachusetts were asked to vote on whether or not they want a Wynn Casino to be constructed in their town, and the answer was loud and clear endorsing the gambling resort proposal from Las Vegas developer Wynn Resorts (NASDAQ:WYNN).  This is the first hurdle crossed by Wynn and all eyes will now be on the decision of the gaming commission for gaming license. Wynn is eyeing expansion outside Las Vegas in the U.S., but growth lies at the other end of the world in Macau.
Everett Votes For Wynn
Voters in Everett overwhelmingly approved an agreement between city officials and Wynn Resorts, who wants to build a $1.2 billion resort casino on the Mystic River. Community approval was required for the casino giant before it could apply to the state gambling commission for one of the three casino licenses allowed under the law.
The agreement calls for Wynn to make $30 million in advance payments to Everett and more than $25 million in annual payments if the casino is built. Wynn also promised to mitigate traffic impacts in the city and complete a multimillion-dollar cleanup of pollution at the site. The company will give hiring preference to Everett residents for the estimated 8,000 temporary and permanent jobs the project would bring. Apart from these factors, the majority of voters endorsed Wynn due to lack of development in the 37 acre of land, earlier home to a chemical plant on the Mystic river. No organized group formed in Everett to oppose the plan, but some residents were wary of a casino bringing traffic gridlock, crime, and other social ills.  This is just the first step and Wynn has a long way to travel. While Wynn and Everett residents are happy with the outcome of the recent vote, all eyes will now be on the license from Massachusetts gaming commission.
As Las Vegas casino industry becomes saturated, Wynn is looking at other avenues for growth. Massachusetts is the third richest state in the U.S. with a per capita income that is $ 7,000 higher than the average U.S per capita income.  Spending on casinos depends on the disposable income of the individuals and the proposed establishment could attract gamers and tourists from all parts of the state. However, we continue to believe that while there may be opportunities to expand in the U.S., most of the growth is likely to come from the Macau region. Macau gaming revenues were up 14% in the first quarter of 2013.  The company should focus more on investing in properties in Macau where other casino players have been doing well. Wynn is developing a new resort in the Cotai region and going forward it will boost the company’s revenues significantly. Interestingly, Macau contributes more than 75% to the company’s value while the casinos in Las Vegas contribute less than 10%. While it may be a good move to diversify within the U.S. but Wynn would be better off focusing on international markets for future growth.
We are currently in the process of updating our model for Wynn Resorts.
Our price estimate for Wynn Resorts stands at $113, roughly 10% below the current market price.Notes:
- A Billion Dollar Win For Wynn In Everett, Jewish Business News, Jun 25, 2013 [↩]
- Wynn’s Massachusetts Casino Plan Meets with Voter Approval, Legal US Poker Sites, Jun 24, 2013 [↩]
- Massachusetts Household Income, Department of Numbers, 2011 [↩]
- Macau casinos up 15% to us$ 10.6 billion in Q1 2013, Yogonet, Apr 25, 2013 [↩]