Wynn Has Benefited From The Surge In 2013 Macau Gaming Revenues

by Trefis Team
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Wynn Resorts
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Macau’s overall gaming revenues grew by 21% year over year in November to $3.8 billion. [1] 2013 has been a solid year for Macau with 19% jump in gaming revenues so far. Gaming growth in Macau is good news for Wynn Resorts (NASDAQ:WYNN) as Macau operations account for more than 85% of its value, according to our estimates. Wynn has been showing growth in its Macau operations for some time now and has seen a mixed year so far in the region.

Macau is the only place in China where gambling is legal. China is seeing growth in the number of HNIs (high net worth individuals), but only a small portion of them visit Macau for gambling. China currently has about 1.3 million HNIs with a combined wealth of $4.3 trillion. [2] As China continues to grow, more people will likely visit Macau for gaming activities and Wynn should thus continue to benefit from the rising demand as it did in 2013. Here is a glimpse of 2013 as it turned out for Wynn.

 

 

How Did 2013 Turn Out For Wynn In Macau?

Wynn has witnessed a mixed year so far, especially in Macau, which saw a 19% jump in gaming revenues amounting to $40.9 billion for the 11 months period. [3] During the first quarter, Wynn posted strong results, driven by lower expenses and growth in its Macau operations. The company posted an increase in its win percentage for VIP operations, which constitute 70% of gaming revenues in Macau. [4]

However, in the second quarter, the company posted strong growth in Las Vegas, but Macau’s growth was sluggish, primarily due to VIP gaming turnover which fell 1.6% year over year. The VIP segment accounts for the majority of Wynn’s gaming revenues and the lower numbers in this segment were a cause of concern. The company had stated that around 600 guest rooms were being renovated, which led to a 5% decline in available room nights in Macau. [4]

In the third quarter, Wynn’s Macau story changed again as the mass-market gaming segment in Macau witnessed a jump of 14% while VIP gaming turnover grew by 10%. During the same period, 600 guestrooms were out of service for remodeling, but Wynn benefited from the rise in gambling and posted solid set of numbers. [4]

For the nine-month period, net revenues for the company grew by 6% to $4.10 billion and the adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) jumped by 11% to $1.31 billion. Wynn benefited from the higher win percentage in Macau. While the VIP win percentage went up 0.23 points to 3.04%, table games win percentage increased by 5.7 points to 36% in Macau. [4]

Further Expansion Plans

Wynn has only one casino in Macau and it faces rising competition from its rivals who have been expanding their resorts in the Cotai region. To stay competitive and take advantage of the growing market, Wynn is constructing an integrated resort in the Cotai region which it expects it to be operational by 2016. The new resort will host 2,000 hotel rooms, 500 gaming tables, restaurants and other retail outlets. The project has a construction budget of around $4 billion and will help the company to take on the competition with other operators such as Las Vegas Sands (NYSE:LVS) and MGM Resorts International (NYSE:MGM).

As Wynn adds more hotel rooms to attract tourists from China’s mainland, it has also positioned itself as a premium brand resort with sophisticated style. This image will help the company to benefit from its presence in the world’s largest gambling hub, especially in attracting more VIP customers. In addition to this, Wynn is competing for a casino license in Massachusetts (in the U.S.) and is exploring online gambling to boost its revenues (Read – Wynn Eyes Online Gambling Growth Potential). While we expect Macau business to continue to grow strongly driven by higher demand, it will be interesting to see if Wynn succeeds in getting a casino license in Massachusetts.

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Notes:
  1. Macau gambling revenue jumps 21 percent in November, Reuters, Dec 2, 2013 []
  2. Understanding the High Net Worth Market in China, Accenture []
  3. Macau gaming revenues reach $40 billion in 2013, Las Vegas Review Journal, Dec 2, 2013 []
  4. Wynn Resorts’ SEC Filings [] [] [] []
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