Wynn Palace Could Generate Up To $4 Billion In Revenue By 2020

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Wynn Resorts

Wynn Resorts (NASDAQ: WYNN) opened its new Wynn Palace casino in Macau’s Cotai Strip in the third quarter of 2016 at an estimated cost of $4.4 billion. Wynn Palace has a capacity of 500 tables, 1100 slots, and about 1700 hotel rooms. Additionally, it has a $100 million fountain show and paintings that add to its appeal. We estimate that Wynn Palace could generate in excess of $4 billion in revenues and $700 million in EBITDA annually by 2020, accounting for about half of Wynn’s Macau business. Mass market gambling has been growing in the region after 2015, when the VIP gambling market suffered due to the Chinese government’s anti-corruption actions. Although we expect mass market gambling to grow, we also believe that VIP gambling will rebound and aid Wynn Palace’s growth.

How Much Revenue Can Wynn Palace Generate By 2020?

Wynn Palace was opened in the aftermath of casino industry trouble in Macau, which started in late 2014. Since the opening of Wynn Palace, Wynn’s overall revenues and profits have grown momentously, as it was further helped by the revival in Macau’s gaming industry in the last few quarters. Wynn was expecting about 250 tables for its new casino but was allotted only 100 tables in 2016, and will get another 50 tables by next year. So Wynn has shifted about 250 tables from Wynn Macau to Wynn Palace, bringing the total number of tables at Wynn Palace to 350.

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In the first 2 full quarters of operations, Wynn Palace has generated nearly $500 million in revenues and $100 million in EBITDA per quarter. As a result, Wynn’s revenues and net income grew by 48% and 35%, respectively. We expect the growth at Wynn Palace to be even higher in the coming quarters as the Macau gaming industry has started to accelerate its growth in the last few months and reached 14% in April. Mass Market gambling has grown in double digits for the last few quarters due to the rise of premium-mass gamblers in the region, and we also expect a rebound in VIP gaming in the near term. We expect these to be the growth drivers of Wynn Palace in the coming years.

When Macau was at its peak in 2013, the average number of VIP tables was 270, which declined to 150 in the fourth quarter of 2016. The average turnover from each table also fell from over $450k in 2013 to $410k in 2016. In Wynn Palace, there are currently 60 VIP tables and, due to the rise in VIP gaming in Macau, we expect the number of VIP tables to grow to 100 in the short term. Thus, assuming $400k average turnover from each table, Wynn Palace’s total VIP turnover could be as high as $4 billion. We expect that by 2020, the number of VIP tables at Wynn Palace will be 120 as it will get an additional 50 tables by 2019, and average turnover per table will be $430k. Current VIP wins as % of VIP turnover at Wynn Palace is about 2.8%, which we expect to increase marginally to 3% by 2020.

In mass market gaming, average table drop has been around $20,000 per table, and we expect the average number of mass market tables at Wynn Palace to be close to 250. Thus, Wynn Palace’s mass market table drop could also exceed $4 billion by 2020. Similarly, with nearly 1100 slot machines and 1700 hotel rooms, Wynn Palace’s other revenues are are likely to reach around $2 billion by 2020.

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VIP Gaming To Be Key Growth Driver For Wynn Palace

 In Q1’17, the primary driver of Macau’s GGR (gross gaming revenues) growth was VIP gambling. Due to the large declines in VIP gambling in the region between 2015-2016, most of the casino operators shifted their focus towards mass market gambling. However, as the impact of the corruption crackdown has softened to a degree, VIP gambling seems to be on the rise again which is likely to result in more VIP tables in Wynn Palace in the coming quarters. Also, a rise in gambling is also likely to drive occupancy rates at Wynn Palace and growth in non-gambling revenues.

See our complete analysis of Wynn Resorts

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