GGRAsia – Wynn Palace to outperform Cotai competition: Fitch

Wynn Palace to outperform Cotai competition: Fitch

May 25, 2016 Newsdesk Latest News, Macau, Top of the deck

Fitch Ratings Inc expects the US$4.2-billion Wynn Palace “will outperform” other casino resorts opening in Macau’s Cotai district.

The credit ratings agency forecasts the property to generate around US$580 million in earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2017.

U.S.-based Wynn Resorts Ltd and its subsidiary Wynn Macau Ltd have yet to provide a date for when in the third quarter the under-construction Wynn Palace casino resort (pictured in a file photo) will open. The project was previously scheduled to open on June 25, after a plan to launch it on March 25 was dropped.

The opening of Wynn Palace is considered by several investment analysts to be a major milestone for Wynn Macau and parent Wynn Resorts. The group currently only has one property in operation in Macau – the Wynn Macau casino hotel.

Wynn Resorts’ management said in April it expected Wynn Palace to generate 2017 EBITDA of between US$630 million and US$850 million. Some investment analysts covering the firm considered at the time that to be a “very bullish” forecast.

MGM China’s under construction new resort on Cotai (pictured) is scheduled to open in the first quarter of 2017, according to an announcement in February. MGM Cotai was previously slated for a fourth quarter 2016 launch.

Sands China Ltd’s chairman and chief executive Sheldon Adelson said, on a conference call with investment analysts in April, that his firm was targeting a mid-September opening for its US$2.7-billion Parisian Macao on Cotai.

“Fitch’s stronger confidence in Wynn Palace takes into account Wynn Resorts’ ability to transfer underutilised resources to Cotai from [the Wynn Macau casino hotel in the] peninsula including approximately 50 tables and US$100 million of annualized labour costs,” the credit ratings agency stated in a Tuesday note.

Fitch stated its optimistic view on Wynn Palace also factored “Wynn Macau’s relatively healthy mass market utilisation statistics throughout the recent downturn.”

It noted that mass market win per table per day at Wynn Macau casino hotel declined by 38 percent since the Macau market peak’s in the first half of 2014, “which is decent considering the number of mass table games at Wynn Macau increased by 28 percent and market-wide mass market revenues declined by about 30 percent.”

Fitch said its forecasts assumed Wynn Macau’s share of the Macau gaming revenue market would increase to about 13 percent by 2018 compared to 10 percent in 2010.

“We expect Wynn Resorts to consolidate market share in Macau with its Wynn Palace opening in the third quarter of 2016 and grow revenues at a faster pace than the market in 2016 and 2017,” the credit ratings agency stated.

A Monday note from brokerage Sanford C. Bernstein Ltd said, regarding the prospects for Wynn Palace: “Should [Macau] VIP rebound faster than expected, it could disproportionately benefit the company as Wynn will possess coveted VIP-oriented product offerings.”

In its Tuesday note, Fitch affirmed its issuer default rating for Wynn Macau at ‘BB’, i.e., below investment grade. Wynn Macau’s rating outlook was labelled ‘stable’.