Can Wynn’s Results For The Year Recover From Their Subpar Q1 Level?

by Trefis Team
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Wynn Resorts
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Wynn Resorts (NASDAQ: WYNN) released its first quarter results late last week with net revenues of $1.65 billion, declining by 3.7% year-on-year. The revenue declines were caused by shrinking casino revenues from Wynn Macau and Las Vegas properties. Macau properties have been pivotal to the company’s growth in the last few years as they helped the company offset the impact of declining revenue from its Las Vegas resorts on the top line. Per Trefis estimates, Wynn’s shares have a fair value of $150, which is about 20% ahead of the current market price. You can view our interactive dashboard on How Has Wynn Fared In Recent Quarters? to observe quarterly revenue trends and modify yearly projections to gauge the impact on the share price. You can also find more of our Consumer Discretionary sector data here.

A Quick Look at Wynn Resorts’ Revenue Sources

Wynn reported $7.7 billion in Total Revenues for full-year 2018. This included four revenue streams:

  • Casino: $5.5 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at Wynn properties. Macau and Las Vegas properties contribute 90% and 10% of the casino revenues, respectively.
  • Rooms: $843 million in FY2018 (11% of Total Revenues). This segment includes income from visitors/tourists who lodge in Wynn properties. Macau and Las Vegas properties contribute 35% and 65% of the room revenues, respectively.
  • Food and Beverage: $867 million in FY2018 (11% of Total Revenues). This segment includes income from restaurants at Wynn properties. Macau and Las Vegas properties contribute 25% and 75% of the Food and Beverage revenues, respectively.
  • Entertainment and Retail: $491 million in FY2018 (6% of Total Revenues). This segment includes income from retail stores at Wynn properties and are subject to different agreements. Macau and Las Vegas properties contribute 54% and 46% of the Entertainment and Retail revenues, respectively.

Revenue Declines Offset by Wynn Palace’s Performance

  • The popularity of Cotai Strip resorts has resulted in consistent growth for Wynn Palace since its opening in 2016. For the latest quarter, operating revenues from Wynn Palace increased by 9.1% to $726 million, thanks to a 7% surge in mass-market gaming and room revenues.
  • In 2018, Wynn Macau observed a 1.8% drop in operating revenues as VIP turnover remaining largely flat compared to the figure in 2017. However, Wynn Macao witnessed a steep 40% reduction in VIP turnover for Q1 2019 compared to Q1 2018 – resulting in a 15% decline in operating revenues. Of late, VIP gaming has been losing its sheen partly due to an increase in the popularity of mass-market gaming, and an overall slowdown in the Chinese economy.
  • Las Vegas operating revenues came in at $401 million, declining by 7% year-on-year. The revenue declines were caused by a sharp 17% drop in casino revenues, although there was a small uptick in revenues from the entertainment and retail business. The revenue mix for Las Vegas properties includes an equal share of casino operations, room revenues, and entertainment and retail income. In fact, Las Vegas resorts have reported improving revenues over recent years primarily due to steady growth in non-casino businesses.

The operating expenses came in at $1.4 billion, growing in line with the total revenues (ignoring the impact of litigation settlement in Q1 2018). Wynn generates 75% of its total revenues from Macau properties and holds Macau’s gaming license until 2022. With the current trade dispute between the U.S. and China escalating, all American licensees in Macau are at a risk of getting caught up in the storm. In any case, we expect the ongoing tariff war to weigh on Wynn’s results in the near future.

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