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Wynn guidance overshadows strong Q3

Wynn Resorts posted strong Q3 results, but provided weaker-than-expected guidance for the final quarter of the year, prompting some analysts to scale back their forecasts.

Deutsche Bank said it has “materially” reduced its estimates for property level EBITDA at Wynn Resorts for the next three years on concern about the slowing VIP and premium sectors in Macau.

The German bank said it has cut its property level EBITDA forecast for this year by 3 percent, next year by 17 percent and by 18 percent for 2020. It also slashed its share price target by 32.8 percent to $123. Deutsche said it believed Wynn’s guidance reflected its own operating mix, rather than being a call on the market as a whole.

Bernstein Research said Wynn guided for an extremely soft Q4, citing weakness in the market post Golden Week. The operator estimated EBITDA per day in a range of $304 million to $340 million, which Bernstein said was some 20-30 percent less that its own forecasts.

“We view this guidance as overly conservative, unless November and December deteriorate much more so than we estimate and/or Wynn loses material market share in both VIP and Mass,” it added in a note.

For Q3 the company reported overall revenue rose 10.2 percent to $1.71 billion, driven by a strong performance at Wynn Macau and Wynn Palace, which offset a decrease from operations in Las Vegas.

Net income was $156.1 million, or $1.44 per diluted share, for the third quarter of 2018, compared to $79.8 million, or $0.78 per diluted share, for the same period of 2017.

Wynn Palace saw an increase of just over 39 percent in operating revenue to $730.6 million, with casino revenues gaining almost 40 percent. Adjusted property EBITDA at the resort soared 63.6 percent.

Table games turnover in VIP operations was $15.53 billion, a 13.4 percent gain, while the table drop in mass market operations was $1.19 billion, a 37.3 percent increase.

At  Wynn Macau operating revenue gained 3.1 percent to $579.6 million, while adjusted property EBITDA was relatively flat at $182.9. Table games turnover in VIP operations was $13.97 billion, a 4.4 percent increase and the table drop in mass market operations rose 10.6 percent to $1.18 billion.

Management also outlined plans for further development at Wynn Palace. It intends to build two towers on the Wynn Palace land with a total of 1,370 rooms, to be known as the Crystal Pavilion.

Deutsche Bank puts the incremental hotel rooms and overall spend for the Crystal Pavilion project at $1.5-2.5 bn, based on similar scope projects in Macau of late.


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