How Much Will Macau Contribute To Wynn’s Top Line Growth?
The anti-corruption crackdown by the Chinese government had adverse effects on Wynn Resorts‘ (NYSE: WYNN) revenue during 2015, as the company’s revenue plunged to $4.4 billion (down nearly $1.5 billion year-on-year). Since then, Wynn has seen its revenue grow consistently. The company’s 2017 revenue jumped to $6.8 billion (up nearly $2 billion year-on-year), largely as a result of a jump in overall Macau casino revenue and a full operational year of Wynn Palace, its new property in the Cotai region. Macau now contributes to nearly 73% of the company’s overall revenue.
Based on recent market trends and the near-term outlook provided by the company’s management, we forecast Wynn to report 5-6% revenue growth in the next two years, from $7 billion in FY 2018 to about $7.7 billion in FY 2020. Of the estimated $660 million added to net revenues, we estimate that Macau will contribute around $345 million, or about 52% of the incremental revenues. We arrive at this estimate from Wynn’s key growth metrics such as VIP table games, Mass market table games, and slot games & other revenue. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers for Macau to gauge how changes will impact its expected revenue.
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Estimates for Key Growth Drivers
Macau contributes to nearly 73% of the company’s overall revenue and has seen its revenue grow by nearly 37% annually between 2015-2017. This was largely driven by full operational year of Wynn Palace and strong growth in the Macau VIP market. We expect Macau to be the driving force for Wynn in 2018, since the gaming revenues in the region grew consistently for the 21st straight month in April 2018. While the VIP market continues to see robust growth since the anti-corruption cooldown, a noteworthy trend in Q1’18 has been robust growth in the mass market segment, growing at just over 20%. This growth can be attributed to increased visitation by casual gamblers due to the improved infrastructure development – High-speed rail link and the Hong Kong-Zhuhai-Macau Bridge, both connecting Macau to Hong Kong. These tailwinds in the Macau casino market, coupled with its positioning in the VIP market, strong growth in the mass market, the strategic alliance with Galaxy Entertainment Group, and an improving Chinese economy, should provide for another year of robust growth for Wynn. Further, the addition of two new properties in Macau should provide long-term growth opportunities.
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