We think there are several drivers behind Wynn Resorts (NASDAQ:WYNN), which is one of the largest gaming companies globally. Wynn currently owns and operates the Wynn and Encore resort casinos in Las Vegas as well as Wynn Macau and Encore in Macau. Below we outline some of the biggest drivers behind our valuation and outlook.
Geographically diversified operations
Wynn’s operations are diversified geographically with a presence in both the US and Macau, the two most prominent casino hubs in the world. The company’s presence in the fast growing gaming market in Macau has helped it grow earnings even in during a recession. Presently, Macau contributes approximately 60% to Wynn’s net revenues. According to our estimates, Macau operations contribute about 75% of the company’s current valuation.
- 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?
Cotai project – Expected to be complete by 2016
In May of this year, Wynn received official approval to begin construction on its new resort in Cotai. Wynn plans to spend about $4 billion on this project. The resort, which is expected to be completed by 2016, will have 2,000 hotel rooms, 500 gaming tables and 10 restaurants. The new resort should further strengthen Wynn’s foothold in Macau.
Positive outlook on Macau gaming industry driven by China’s growing economy
The outlook on the future prospects of the Macau gaming industry is promising. The burgeoning Chinese middle class and increasing number of high net worth individuals in Asia are expected to be major drivers for gaming revenues in Macau. According to a study by PricewaterhouseCoopers, the Macau gaming market is expected to more than double to $62.2 billion between 2010 and 2015. 
Key infrastructure initiatives underway in Macau
The Macau government is focused on boosting the island’s annual visitor count. First, the government is developing the Macau Light Rapid Transit that will link ferry terminals with key gaming locations. The transit system will have 12 stops on the Macau peninsula and 11 stops on Cotai and Taipa. Second, the government is building a bridge connecting Hong Kong and Macau that should reduce travel time by car from 4 hours to just 40 minutes. The project is expected to be completed by 2015-2016.
We have a $136 price estimate for Wynn Resorts, which is currently higher than the market price.Notes: