Wynn’s Q4 Performance Bolstered By An Uptick In Las Vegas While Macau Appears To Have Stabilized

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Wynn Resorts (NASDAQ:WYNN) recently reported its full Q4 2015 earnings, which were in line with the street estimates. It should be noted that the company had already released preliminary results few weeks back. While Macau operations continued to face the headwinds from lower demand, the company’s Las Vegas operations witnessed a 4% jump in the top line. Wynn’s stock price surged over 15% after the earnings conference call, as the company’s management stated that the Las Vegas market is shaping well in Q1 while Macau appears to have stabilized. [1] Macau posted a 21% decline in gaming revenues in January, marking 20th consecutive month of decline. [2] This can be attributed to two-year-old anti-corruption campaign and slowing growth in China’s economy.

Wynn Macau posted a 27% drop in revenues and a 34% drop in EBITDA due to continued headwinds in the region. The VIP gaming turnover plunged 37% while its win percentage of 2.6% was also lower than 2.8% seen in the prior year quarter. On the other hand, mass-market table drop declined only 11% and its hold percentage of 19.3% was also higher than 18.7% seen in the prior year quarter. These figures points towards continued weakness on the VIP front while mass-market is comparatively trending better. In fact, Wynn reduced its VIP gaming table count from 244 in Q4 2014 to 192 in Q4 2015, moving more tables to mass-market gaming operations. [3]

We continue to remain bullish on the long-term Macau story, primarily led by the growing middle class of China, which will fuel the Mainland China visitation to Macau. The Mainland China visitors to Macau are also on the rise and have grown from around 13 million in 2010 to over 20 million in 2015. [4] These factors will primarily boost the mass-market gaming in the region and Wynn could benefit from the same, especially with its new Cotai resort, which will significantly enhance its capacity in the region. Wynn will likely open its new Cotai resort around June this year. The company’s management was positive on table allocation during the conference call, stating that the government is in favor of development in Macau. [1] While the company intends to have 500 gaming tables in the new casino resort, it is still unclear how many gaming tables the government will approve.

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Wynn also posted better than expected growth in the Las Vegas market. However, the table drop was down by double-digits due to lower baccarat volume. It should be noted that baccarat is more popular with Asian players and the slowdown in Macau has also impacted the gaming scene in the U.S. Having said that, Wynn posted an uptick in revenues and a double-digit growth in EBITDA in Las Vegas primarily due to better casino hold percentage and a slight growth in the hotel operations. Looking forward, the company is seeing non-gaming operations in good shape in Q1 and it expects the stability to continue in the second half of 2016. Also, the company will begin the construction of its new casino resort in Boston in April this year and expects it to be completed in 30 months. [1] The new project will be a significant contributor to Wynn’s U.S. operations. Massachusetts is an important location with a per capita income that is $8,399 higher than the average U.S. per capita income, which bodes well for gaming and non gaming operations in the region. Boston is the largest city in Massachusetts and it is well connected with other major cities in the state and region. The new casino will thus have a geographic as well as demographic advantages for Wynn.

See our complete analysis of Wynn Resorts’ stock here

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Notes:
  1. Wynn Resorts’ (WYNN) CEO Steve Wynn on Q4 2015 Results – Earnings Call Transcript, Seeking Alpha, Feb 12, 2016 [] [] []
  2. Monthly Gross Revenue from Games of Fortune, Gaming Inspection & Coordination Bureau MACAU SAR, Feb 2016 []
  3. Wynn Resorts’ SEC Filings []
  4. Visitor Arrivals for December 2015, Macau Statistics & Census Service, Jan 22, 2016 []