Palace Ramp-Up Drives Wynn’s Q3

by Trefis Team
+74.69%
Upside
103
Market
180
Trefis
WYNN
Wynn Resorts
Rate   |   votes   |   Share

Wynn Resorts (NYSE: WYNN) reported its Q3 2018 earnings on November 7. Its top line increased significantly to $1.7 billion, up by 10% on a y-o-y basis in Q3 compared to the same period last year, due to robust growth in Macau – Wynn Palace being the largest contributor – offset by subdued performance at Las Vegas. Wynn’s Las Vegas revenues fell by nearly 14% y-o-y to slightly under $399 million, largely due to a broad-based decline in gaming revenue (table and slot revenues) due to a slowdown in visitations, which further impacted non-gaming revenue – lower occupancy rates (down 2% y-o-y) and RevPar (down 5% y-o-y). Much of the revenue growth came from Macau, largely driven by robust growth in both mass market and VIP games. Macau revenue was up nearly 21% year-on-year to just over $1.31 billion, forming nearly 75% of the company’s net revenues.

A key takeaway from Wynn’s Q3 earnings call was its decision to shelve the Paradise Park lagoon project and replace it with a revamped golf course. Further, we believe Wynn’s changed management, coupled with optimism surrounding its Boston project, should help it prevail in the ongoing lawsuits and get a nod from the gaming board. Consequently, we expect near-term pressure in Las Vegas as a result of the redevelopment of the golf course, planned development of new restaurants, convention and retail center and its ongoing work at Boston Harbor. For Macau, we expect some near-term pressure as a result of the renovation of Encore rooms. Despite this, we expect the record October, coupled with the holiday season in Q4 to drive Wynn’s full year results.

We have updated our model and cut our price estimate for Wynn Resorts to $180, which is now significantly higher than the market price. Our interactive dashboard analysis on Wynn’s Performance In Q3 And Expectations For 2018 details our expectations for the company. You can modify the different driver assumptions, and gauge their impact on the company’s earnings and valuation.

Estimates for Key Growth Drivers

Macau contributes nearly 75% of the company’s overall revenue and continued its strong performance in Q3, as a result of robust growth in both casino and non-casino revenues. This was largely due to increased VIP  and Mass visitations at Wynn Palace and robust VIP visitations at Wynn Macau. Despite the slowdown in gross gaming revenues (GGR) – due to typhoons and weak VIP market – the Cotai strip witnessed increased visitations in both VIP and Mass market and higher occupancy rates at both its properties. However, we expect Wynn to see some near-term pressure due to the renovation of its Encore suites and full-scale development of two new restaurants, which will likely impact the company’s margins. We expect Macau to contribute significantly to MGM’s growth in 2018, since the gross gaming revenues (GGR) in the region grew consistently for the 27th straight month in October 2018. Further, we expect the holiday season in Q4 to drive Wynn’s full year results.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!