Wynn Resorts (WYNN) Last Update 9/24/21
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% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Wynn Resorts
STOCK PRICE
DIVISION
% of STOCK PRICE
Macau
72.1%
$135
Las Vegas
25.7%
$48
Boston
2.2%
$4
Net Debt
28.2% $53
TOTAL
100%
$187
$134.11
Yours
Trefis Price
N/A
$90.94
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Wynn Resorts Company

VALUATION HIGHLIGHTS

  1. Macau (Macau VIP Table Games, Macau Mass Market Table Games, Macau Slot Games, Wynn Macau Hotel, Macau Food, Beverage & Others) constitutes 72% of the Trefis price estimate for Wynn Resorts's stock.
  2. Las Vegas (Las Vegas Hotels, Las Vegas Food & Beverage, Las Vegas Retail & Other, Las Vegas Table Games, Las Vegas Slot Games) constitute 26% of the Trefis price estimate for Wynn Resorts's stock.

WHAT HAS CHANGED?

Recent earnings and sports betting business

• In recent earnings, Wynn Resorts highlighted the strong recovery in Las Vegas and Boston over the last couple of months. The steep fall in coronavirus cases, rising discretionary, and revenge tourism have been key drivers of Wynn’s casino revenues in Las Vegas and Boston. Notably, the Wynn Las Vegas’ second quarter table games wagers almost reached Q2 2019 levels, resulting in comparable revenues and EBITDA. While the re-imposition of stringent pandemic control measures in Macau is a near-term headwind for the stock, long-term growth in mass-market gaming and rising tourist visitations from China are likely to assist revenues and earnings.

• Wynn Resorts has been expanding its presence in the sports betting and iGaming industry with its WynnBET application. While the company’s sizable Macau exposure has been weighing on its finances, the sports betting business unveils a market opportunity comparable to Macau (In 2019, Macau’s reported $36 billion of gross gaming revenue while the U.S. sports betting market is projected to reach $40 billion at maturity).

• Therefore, the benefits of competing in the sports betting business outweigh the risk of a prolonged slump in Macau.

• Moreover, the company has also announced the public listing of Wynn Interactive, the online gaming division of Wynn Resorts, in the recent earnings release.

• The sports betting and iGaming industry is projected to have the potential to eventually reach $40 billion in the U.S. and $70 billion globally. Thus, multiple online betting platforms and the commercial casino operators are eyeing a sizable market share.

• In response to the coronavirus pandemic, the company's management took stringent health & safety measures and implemented temporary property closures.

• The company has a strong balance sheet to cover fixed costs for a couple of quarters.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Wynn’s value that present opportunities for upside or downside to the current Trefis price estimate for Wynn Resorts:

Macau VIP Table Games

  • Wynn Macau’s VIP Table Games Turnover: Wynn’s VIP Table Games Turnover increased significantly since 2007. It increased from $37.6 billion in 2007 to $108 billion in 2014. However, VIP gaming turnover declined subsequently from $108 billion in 2014 to $47 billion in 2016 due to the anti-corruption crackdown by the Chinese government. This figure improved to $57.7 billion in 2018 as a result of increased visitation and supply. We currently estimate VIP gaming turnover to increase to about $79 billion by the end of our forecast period. In case Wynn’s VIP Table Games Turnover reaches $93.6 billion at the end of the forecast period led by a resumption of VIP gaming growth, there could be an upside potential of around 10% to our estimate for Wynn’s stock. In a slightly bearish scenario, if VIP gaming is unable to regain momentum and the turnover remains rangebound around $67 billion at the end of the forecast period, there could be a 10% downside to our estimate for Wynn’s stock. We believe that the increasing population of Chinese high net worth individuals (HNIs) and the new Cotai project are likely to be the stimulating factors for future growth.

  • Wynn Macau Casino EBITDA Margin: Wynn’s Macau casinos EBITDA margin has increased from 15% to 26% between 2006 and 2014. However, the same fell to 20.5% in 2015 due to challenging gaming environment. The revival of the gaming environment coupled with varied infrastructure developments has propelled the Margins to about 30% in 2018. We expect margins to grow gradually over the current levels till the end of our forecast period. In case these margins cross 37% mark driven by strong growth in mass-market gaming, which offers higher margins, there could be an upside potential of more than 10% to our estimate for Wynn’s stock. In a slightly bearish scenario, considering the Macau market continues to remain weak in the coming years, and the margins stay around 28% by the end of the forecast period, there could be a 10% downside to our estimate for Wynn’s stock.

For additional details, select a driver above or select a division from the interactive Trefis split for Wynn Resorts at the top of the page.

BUSINESS SUMMARY

Wynn Resorts is a leading developer, owner, and operator of destination casino resorts. It currently owns and operates the Wynn Las Vegas and Encore at Las Vegas, as well as the Wynn Macau and Encore at Macau. Wynn reports its results in two segments: Wynn Las Vegas, (which includes Encore at Wynn Las Vegas) and Wynn Macau.

Las Vegas

Wynn in Las Vegas hosts 4,748 hotel rooms and suites, 192,000 square foot casino space has 238 gaming tables, baccarat salons, private VIP gaming rooms, poker rooms, approximately 1,829 slot machines, and a race and sports book.

Macau

Wynn Macau features 1,008 hotel rooms and suites. It has 273,000 square feet of gaming casino space. The casino has 312 gaming tables, 954 slot machines, and poker rooms. The main competitors include prominent firms in the gaming and casino industry such as Las Vegas Sands, MGM Resorts, Boyd Gaming, Harrah’s Entertainment, SJM, and Galaxy, among others. A new casino resort Wynn Palace features 1,706 guest rooms, suites, and villas. It has 424,000 square feet of casino space. The casino has 323 table games and 1,020 slot machines, private gaming salons, and sky casinos.

The Macau region contributed approximately 75% to the gross revenues in 2018, whereas the Las Vegas region contributed the rest. Wynn conducts its gaming activities on credit as well as a cash basis.

SOURCES OF VALUE

We believe that Macau VIP gaming operations are the primary source of value for Wynn Resorts because:

Significantly Higher Volume Than Las Vegas Casinos

Macau offers significantly high gaming revenues as compared to the Las Vegas Strip. Macau gaming revenues are approximately five times higher than that of the Las Vegas Strip. In 2018, gaming revenues at Las vegas Strip were $7.24 billion as opposed to about $37.6 billion in Macau. This significant difference is due to the very high demand for gambling in Macau, which is also the only place in China where gambling is legal. A lot of tourists from nearby countries visit Macau for gambling. In fact, the 2014 figure was much higher at $44 billion, seven times the size of the Las Vegas Strip. The casino business is primarily divided into two categories in Macau, VIP gaming, and mass-market gaming. VIP gaming offers high volume, but lower casino hold percentage while mass-market gaming offers high hold percentage. Wynn has established a premium casino image in the region, and it is helping the casino attract more and more VIP players. Wynn is further developing a new casino resort in the Cotai region. The new resort will further enhance Wynn’s capacity in Macau and drive growth in the coming years.

Premium Brand Image

Wynn is recognized worldwide as a premium brand resort. It has a sophisticated style and offers exquisite luxuries to its customers. It mainly caters to high-end gaming customers, and the company does not intend to shift its focus from its existing global image. Its premium offerings include an array of amenities and indulgences including private lagoons and waterfalls, an exclusive shopping promenade featuring renowned designers, an 18-hole golf course designed by Tom Fazio and Steve Wynn as well as a tranquil spa and salon. The nightly entertainment includes the magical Lake of Dreams and the provocative water show ‘Le Reve.’ The company has been targeting the VIP gaming customers and has been successful in its business model so far. We estimate that Macau VIP gaming contributes more than 20% to Wynn Resorts’ stock price.

KEY TRENDS

Recent Decline In Macau Gaming

2015 was tough for all the casino operators in Macau, and it marked a 34% decline in gross gaming revenues. The primary reason for this drop is the government’s anti-corruption crackdown. A wave of high-profile arrests of senior Chinese officials has hurt the VIP business of Macau casinos as they preferred to maintain a low profile. Furthermore, the weakening economy added to the woes for casino operators in the region. Moreover, Beijing wants Macau to diversify its economy, largely dependent on gambling, which accounts for a significant portion of the local government revenues.

Starting in 2016, the overall gaming market started to improve and continued into 2017, the gross gaming revenues of the region increased by about 20%. This metric improved by 14% in 2018, sustaining its growth momentum from a year ago. Much of these can be attributed to the new casino openings in the region, including Wynn Palace. We continue to expect strong growth in Macau’s GGR in the short term, driven by increased visitation due to better road and rail connectivity. However, a slow start to 2019 and the fear of the weakening of the Chinese economy could slightly dampen its near term outlook.

Increasing Share Of Macau Casino Revenues

Wynn is looking at Macau, the Asian replica of Las Vegas, for future growth. Wynn currently operates the Encore at Macau, and its Cotai resort was completed in the third quarter of 2016. The following factors strengthen the trends mentioned:

Macau surpassed the Las Vegas Strip as the world’s biggest gambling hub in 2006 after the government allowed the entry of overseas casino operators. Since then, the region has witnessed unprecedented growth. In 2014, the region collected $44 billion in gaming revenues while the figure stood at $29 billion in 2015, still far more than the gaming revenues collected on the Las Vegas Strip. Macau continued its robust showing in 2018, with gaming revenues growing to nearly $37.6 billion.

A strong Chinese economy followed by a burgeoning middle class, an increasing population of high net worth individuals, and enhanced infrastructure connectivity is helping boost Macau’s growing gaming industry. Macau offers a world-class gaming infrastructure. All major gaming companies like Melco Crown, Las Vegas Sands, and MGM Resorts have a presence in Macau.

Las Vegas Gaming Market Growth Slowing Down

The economic recession of 2008-2009 slowed down the growth of the Las Vegas gaming industry. Other factors mentioned below also accentuated the slow down:

Other US states like Pennsylvania and Delaware have legalized table games. Similar actions by other states could affect the number of tourists visiting Las Vegas. More than 80% of the tourists visiting Las Vegas are domestic. The Las Vegas gaming market has reached a saturation state. Casino operators indulge in intense competition to sustain their margins. Intense competition is affecting the industry margins.

Excess room capacity hitting the markets is expected to pressurize the margins of the gaming industry by pushing average daily rates down. Furthermore, Asian tourists prefer Macau to Las Vegas as a result of two things: firstly, it offers world-class gaming infrastructure since the advent of foreign gaming companies in Macau in 2006, and secondly, it is at a nearby location. The decline in the number of Asian tourists would also affect the Las Vegas gaming industry.

Gaming revenues in Las Vegas has been fluctuating in recent past, casino revenues in 2018 declined slightly due to a fall in win % and slot machine win. However, Las Vegas reported a decent uptick in tourist visitations in the first two months of 2019, and this trend is expected to continue in the near term. As a result of improving tourism in Las Vegas and the rising demand for gaming and leisure should continue to drive the industry in 2019.

Key Infrastructural Initiatives Underway

The Macau government is reinforcing a series of initiatives in order to drive visitor growth in the region. The gaming industry is a key contributor to Macau’s GDP. The government is investing in new transportation links to ease travel for Chinese visitors. It should be noted that most of the tourists visiting Macau are from Mainland China.

The Guangzhou-Zhuhai high-speed railway is expected to improve travel time from Guangzhou to Macau to 40 mins, down from the 2+ hours taken by bus. The Macau Light Rapid Transit will link ferry terminals and key locations. It will have 12 stops on the Macau peninsula, 11 stops on Cotai and Taipa, and will fully integrate different regions within Macau.

Also, the Hong Kong-Zhuhai-Macau bridge, which opened in October 2018, will connect Hong Kong to Macau, thereby, reducing car travel time from 4 hours to 40 minutes and should drive greater Mass market visitations. The Macau International Airport is presently undergoing capacity upgrades. Its capacity will be increased to handle 10 million people per year from the current capacity of 7.8 million people. This project is expected to get underway in early 2019.