GGRAsia – Wynn Macau’s 1Q preview above analysts’ consensus

Wynn Macau’s 1Q preview above analysts’ consensus

Apr 06, 2016 Newsdesk Latest News, Macau, Top of the deck, World

Casino operator Wynn Resorts Ltd filed on Tuesday “preliminary expectations” of its financial results for the first quarter of 2016, with the expected results for the Macau operations coming in above analysts’ consensus.

Wynn Resorts – the parent company of Macau-based Wynn Macau Ltd – said its net revenues from Macau are expected to be in the range of US$603 million to US$613 million in the three months to March 31, compared to US$705.24 million in the prior-year period. That would represent a fall in quarterly net revenues amounting to between 14.5 percent and 13.1 percent judged year-on-year.

The Macau operation’s adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) are expected to be in the range of US$187 million to US$195 million for the first quarter of 2016, compared to US$212.3 million for the first quarter of 2015.

Brokerage Union Gaming Securities Asia Ltd said in a note on Wednesday that Wynn Macau’s pre-announced results show a “solid beat”, on market consensus, with revenues and property-level EBITDA above analysts’ consensus of US$592 million and US$166 million, respectively.

“On a sequential basis, revenues are expected to grow 9 percent compared to the fourth quarter of 2015 and EBITDA is expected to grow 19 percent,” said analyst Grant Govertsen.

Wynn Resorts said in its preliminary quarterly results announcement that VIP turnover in its Macau operations was down 21.4 percent year-on-year to approximately US$13.5 billion. The firm reported table drop in the mass-market segment was expected to be US$1.2 billion, down 5.6 percent from a year earlier.

“We note that based on segment data reported today it does not appear that [the] luck factor played a role, suggesting that the EBITDA number is a clean beat,” said Mr Govertsen.

He added: “We note EBITDA margin of 31.4 percent was the highest since the fourth quarter of 2014 and well above the 2015 average of 28.8 percent.”

Wynn Macau’s total gross gaming revenue (GGR) in the first quarter of 2016 was approximately US$677 million, up 7 percent sequentially, according to Union Gaming.

Market wide in Macau, accumulated casino GGR for the first quarter of 2016 was nearly MOP56.18 billion (US$7.03 billion), a 13.3 percent decline year-on-year but up 2.5 percent from the fourth quarter of 2015, according to official data.

Wynn Palace

Wynn Resorts is hosting an investor conference in Las Vegas on Wednesday, with analysts expecting to get more details about the opening date for the US$4.1-billion Wynn Palace casino resort being developed in Macau’s Cotai district.

Brokerage Sanford C. Bernstein Ltd said it believed a portion of the sequential EBITDA margin improvement in the first quarter at the Macau operations “likely came from costs being shifted from operating to pre-opening expenses as we near the opening of Wynn Palace”.

“The company did not provide operating income, so the magnitude of the shift is not discernable … Overall, we view the preliminary result as positive and reinforcing the notion of a stabilising environment,” said analysts Vitaly Umansky and Simon Zhang.

The Macau-based casino operator said in its annual report published on March 31 that “potential construction delays” could push the opening date for the Cotai casino resort “into the second half of 2016”. The resort is currently scheduled to open on June 25, after a plan to launch it on March 25 had to be dropped.

“Based on on-the-ground chatter in Macau, we would not be surprised to see the opening date pushed back by a couple months,” said Union Gaming’s Mr Govertsen.

Wynn Resorts projects first quarter revenue in the firm’s Las Vegas operations will have been US$384 million to US$394 million, down from US$386.9 million in the prior-year quarter. Adjusted property EBITDA is expected to be between US$105 million and US$113 million, compared to US$110.7 million a year earlier.

“Overall, we think the results are better than expected with aggregate EBITDA likely ahead of our forecast, which was ahead of consensus,” said a note on Tuesday from analyst Carlo Santarelli of Deutsche Bank Securities Inc.

Mr Santarelli however said the Las Vegas operations missed the institution’s forecast for revenue and property EBITDA.

“High table hold [in Las Vegas] was offset by weaker volumes (high hold negatively impacts volume), likely due to continued softness in high end baccarat play,” said the analyst.