GGRAsia – Wynn Resorts cuts dividend in 1Q as Macau EBITDA slumps

Wynn Resorts cuts dividend in 1Q as Macau EBITDA slumps

Apr 29, 2015 Newsdesk Latest News, Macau, Top of the deck, World

U.S.-based casino operator Wynn Resorts Ltd swung to a quarterly loss in the first three months of 2015 amid steep revenue declines in Macau. The company on Tuesday announced a 66.7 percent cut to its dividend payout.

Company wide, Wynn Resorts reported a loss of US$44.6 million, or US$0.44 a share, for the first quarter of 2015, compared with earnings of US$227 million, or US$2.22 a share, in the year-prior period.

Net revenue for the first quarter of 2015 was US$1.09 billion, down 27.8 percent from a year earlier. Adjusted property earnings before interest, taxation, depreciation, and amortisation (EBITDA) declined 34.7 percent year-on-year to US$323 million in the three months ended March 31.

Net revenue at Las Vegas operations increased by 1.6 percent to US$386.9 million in the first quarter of 2015. Adjusted property EBITDA in Las Vegas was US$110.7 million, up slightly compared to the prior year.

The Las Vegas-based casino company said revenue from its Macau operations fell 37.7 percent year-on-year in the first quarter, to US$705.4 million. The figure was in line with the overall decline in the city’s gross gaming revenue (GGR) for the period. GGR market wide in Macau casinos fell 36.6 percent for the whole of the first quarter compared with a year earlier, according to official data.

The firm’s first quarter adjusted property EBITDA in Macau was US$212.3 million, down 44.7 percent from a year ago “due primarily to weakness in the VIP segment,” said Wynn Resorts.

Wynn Macau’s property EBITDA was about 8 percent below consensus expectations of around US$231 million, said analysts of UBS Securities Asia Ltd.

“The miss to our estimates is driven by a combination of slightly lower VIP hold, lower non-gaming revenues, higher opex [operational expenditure] and also likely fluctuations in bad debt provisions,” analysts Anthony Wong and Angus Chan said in a note on Wednesday.

Table games turnover in the Macau VIP segment declined by 52.4 percent in the period, said Wynn Resorts.

Commenting on the results, Deutsche Bank AG analyst Karen Tang said management at Wynn Macau reallocated 100 more hotel rooms away from junkets to mass, “helping to grow the mid-tier premium-mass segment,” of gambling customers.

“Hence, first quarter mass table revenue bucked the market downtrend and grew 12 percent quarter-on-quarter (-7 percent year-on-year vs market -18 percent year-on-year),” added Ms Tang.

First-quarter net profit attributable to owners of Wynn Macau Ltd fell 59.3 percent to US$111.6 million, the Macau unit said in a filing to the Hong Kong Stock Exchange on Wednesday.

Non-casino revenues in Macau, before promotional allowances, decreased 21.8 percent during the quarter to US$88.4 million.

Dividend cut

Wynn Resorts said it was cutting its dividend to US$0.50 a share, from the US$1.50 it paid in February. The news sent its Nasdaq-listed shares down more than 11 percent in after-hours trading.

On a conference call with investors on Tuesday, Wynn Resorts’ management said the board “would not hesitate to continue to reduce the dividend” in future quarters if it were deemed necessary.

“The trends in Macau were beginning to be very visible in the fourth quarter,” chairman and chief executive Steve Wynn said on the call, adding that “the depression of the VIP market continues”.

“Our hopes for a turnaround during Chinese New Year turned out to be incorrect,” he said.

On the call, Mr Wynn also highlighted a number of current uncertainties in the Macau market, including: construction labour quotas; gaming table allocation; timing of infrastructure; and VIP play volume.

Ms Tang said that for Wynn Macau, Deutsche Bank is expecting dividend per share “to be cut by 60 percent” from the HKD1.75 (US$0.23) seen in 2014, to HKD0.70 this year.

“But today’s announcement means that, to fund parent company dividend, Wynn Macau’s 2015 dividend per share can be as low as HKD0.42, or only 2.4 percent dividend yield (vs consensus 4.6 percent dividend yield),” she added.

UBS analysts Mr Wong and Mr Chan said the reduced dividend “is not only driven by lower cash flow from Macau … but also cautious outlook in Macau and Las Vegas, capital commitments in Boston and potentially with an eye on some progress in Japan – with casino bill recently re-submitted at the Diet”.

The casino operator has a second project under construction in Macau. The US$4.1 billion property in Macau’s Cotai district is scheduled to open in the first half of 2016, but the company management said on the conference call it still expects an opening by end-March 2016.

The first quarter results come days after a proxy battle with Elaine Wynn, Wynn Resorts’ co-founder and third-largest shareholder. Owners of the company voted on Friday at the annual general meeting, not to return her to the board.