Wynn Resorts (NASDAQ:WYNN) will announce its earnings shortly though the date has not been announced. Last year, the company saw an overall revenues increase approximately 26% which was primarily driven by impressive performance in Macau. Wynn competes directly with Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM), SJM (HKG:0880), Galaxy (HKG:0027) and Harrah’s among others.
This quarter we are watching Wynn’s performance in Las Vegas which has started showings signs of a recovery. In Q4 2011, revenues from Las Vegas operations witnessed an increase of 7.2% vis-a-vis Q4 2010. We are also optimistic about VIP table games turnover, we expect it to show impressive growth due to the potential size of the Macau gaming market.
- Why is Macau market important for LVS and Wynn?
- Are Wynn’s improved earnings from Macau sustainable?
- Will positive signals from Macau’s casino industry impact MGM and Wynn Resorts?
- Our Revised Price Estimate Of $100 For Wynn Resorts Post Q1 Earnings
- What’s Wynn Resorts’ Casino Revenue & EBITDA Breakdown?
- How Has Macau Revenue & EBITDA Contribution Changed For Wynn Resorts In The Last 5 Years?
Macau VIP Table Games
Macau VIP table games are a major contributor to Wynn’s revenues. In 2011, revenues grew nearly 30% in this segment. According to our estimates, Macau VIP tables games contribute almost half of Wynn’s current valuation. We expect VIP table games to drive revenue growth for casino operators in Macau including Wynn due to the following factors:
- VIP Baccarat volumes are expected to increase: VIP Baccarat is gaining popularity in Asia, particularly China. It has been the strongest contributor to Macau’s gaming industry with approximately 73% share of the total casino revenues. In 2011, revenues grew 45% and reached $24.5 billion.
- Expected completion of Cotai project by 2015: The expected completion of the Cotai project in 2015 will lead to an increase in VIP table games turnover. Wynn’s CEO Steve Wynn has asserted that the company would focus to target the high end gaming market.
- Increasing population of Chinese HNIs: VIP gaming currently represents two-thirds of Macau gross gaming revenue. According to a Cap Gemini-Merrill Lynch Private Wealth report, China recently surpassed the UK to become the fourth largest population of HNIs.
Our price estimate for Wynn Resorts stock stands at $137, which is at a premium to the current market price.