Wynn Resorts (NASDAQ:WYNN) recently reported its Q1 2014 earnings, which came out largely on expected lines with 14% year-over-year revenue growth in Macau. Adjusted earnings were $2.32 per share, 14% higher as compared to the prior year quarter. The mass-market table game win in Macau jumped 24%, while VIP gaming grew by 27%. Macau EBITDA jumped 16% to $384 million for the quarter. On the other hand, Las Vegas operations were weak during the quarter. While the revenues declined 1.5% to $381 million, EBITDA was $110 million, a decline of 8% from the prior year quarter.  Wynn’s Cotai resort is running on schedule and is expected to open around Chinese New Year in 2016. Macau continues to grow strongly in gaming with revenues touching $12 billion in the first quarter, up 20% from the prior year period.  We believe that Wynn will continue to benefit from this growth as it has established an image of a premium casino and this has helped the company to attract more VIP players.
We’ll soon be updating our price estimate for Wynn Resorts based on the first quarter earnings announcement.
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U.S. Operations Stay Muted
According to our estimates, Las Vegas operations contribute more than 13% to Wynn’s value. The company witnessed a slight decline in the region as compared to the prior year quarter. The table games drop declined 3.2% to $669 million and the table games win percentage was 20.7%, way below than 26.7% in the prior year period. Net casino revenues were down 12% to $155 million. In non-casino operations, the company’s hotel operations did well and saw 12.6% jump in revenues to $103 million, primarily due to higher REVPAR (revenue per available room) and occupancy levels.  Overall in 2013, Nevada’s casino industry collected $11.14 billion in revenues, up 2.6% from 2012 and best collection since 2008.  Given the positive trend in Las Vegas gaming, we expect it to do well in the coming quarters. Wynn’s management at the earnings call stated that the second quarter will be 6% to 7% higher than previous year. 
Wynn Sees Higher Macau Mass-Market Table Games Win
Table games turnover in the VIP segment was $36 billion, up 27% as compared to the prior year quarter. VIP table games win as a percentage of turnover for the quarter was 2.79%.  While this was within the company’s expected range of 2.7% to 3%, it was significantly below the 3.14% experienced in the prior year quarter. VIP gaming is an important segment for the company and it accounts for close to 50% of Wynn’s value, according to our estimates. However, it offers much lower margins as compared to mass-market gaming.
Mass-market gaming has been growing rapidly in Macau and Wynn is also benefiting from its growth. While there was just 1% increase in mass-market drop to $692.5 million, the segment’s win percentage of 43.4% was much higher than the 35.5% experienced in the prior year quarter. The higher win percentage led to 24% jump in mass-market table games wins to $301 million. 
Overall, the company was able to balance its Macau business between a volume gain in the VIP segment and a gain in the win percentage in the mass-market segment, which provides faster growth and higher margins. Wynn’s table split was 213/492 towards mass-market gaming. Wynn has been converting some of its junket space on the Encore side of the casino into premium mass and reshuffling. This has benefited the company in the past month, which saw 55% uptick in mass-market revenues. 
- Wynn Resorts’ SEC Filings [↩] [↩] [↩] [↩]
- MACAU CASINO GAMING REVENUE UP 20% IN Q1 ON MASS MARKET SURGE, Calvin Ayre, Apr 16, 2014 [↩]
- Baccarat helps drive Nevada gaming revenue to $11 billion in 2013, Review Journal, Jan 31, 2014 [↩]
- Wynn Resorts Management Discusses Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, May 1, 2014 [↩] [↩]