Wynn Resorts dividend cut reflects uncertain outlook in Macau

Tuesday 28th of April 2015

Wynn Resorts’ large dividend cut from $1.50 per share to $0.50 in the first quarter following dire financial results from its Macau arm reflect a cautious outlook for Macau, UBS says.

Wynn Resorts, which cut its quarterly dividend to $0.5 from the previous quarter, announced that its Macau operation reported property EBITDA of $212 million, down 45 percent YoY, and below UBS’ expectations of around $231 million.

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

The company reported overall net revenue of $1.1 billion, missing estimates for $1.2 billion, according to Capital IQ. Las Vegas revenue gained 1.6 percent.

The decision to cut the dividend is not influenced by lower cashflow from Macau but also a “cautious outlook in Macau and Vegas, capital commitments in Boston and potentially with an eye on some progress in Japan- with casino bill recently re-submitted at the Diet,” UBS said.

Read here the original story on Wynn's 15Q1 results

In a separate note by UBS, analyst Robin Farley said the dividend cut “is telling of elevated levels of uncertainty, no expectation of a rebound in Macau.” The note adds that Vegas’ inability to recover due in part to a stronger dollar and softer Chinese demand, has resulted in business being lackluster at Wynn.

“Wynn has seen summer trends not pickup in the same way they did last year, though April+May have flat leisure and convention mix vs. last year.”

Wynn Resorts says it expects Wynn Palace to open around March 2016 but given the slow approval from government on labour quotas UBS puts the opening date around late Q2. UBS added that it expects the table allocation to be lower than the company hopes for.

“Management commented that at the start of the project, they believed they needed ~450-500 tables for Wynn Palace which the govt did not seem to object to at the time; but management expectations for new tables have since come down. We assume 350 tables for Palace.”