Wynn results disappointing, but Palace opening date a positive

Wednesday 29th of July 2015

Wynn Macau’s 15Q2 results were largely below analysts’ forecasts as the operator saw a steep drop of 44 percent year-on-year in earnings before interest, taxes, depreciation, and amortization, though the announcement of a solid opening date for Wynn Palace is a positive, analysts say.

Wynn Macau’s adjusted property EBITDA of $173 million missed Bernstein Research’s estimate by 14 percent, on both weaker revenue and margin erosion.

“Lower-than-anticipated results were principally due to low hold rate in Mass, while VIP held up well relative to the market.”

“The company continues to experience margin compression as it carries excess operating costs (particularly labor) in preparation for the opening of Wynn Palace on Cotai.”

Wells Fargo analyst Cameron McKnight said Wynn Macau’s EBITDA missed consensus expectations of a 39 percent decline.

“While Macau results are now back to early 2010 levels, they were broadly in-line with extremely low investor expectations. Steve Wynn’s tone on the call was certainly less negative than last quarter.”

Wynn’s management reiterated its late March 2016 opening date for Wynn Palace with the government granting the company’s final request for labor.

“We are reducing our 2015/16 Macau EBITDA estimates from $787MM/$990MM to $772MM/$939MM (with Cotai),” McKnight said.

UBS analyst Robin Farley said with Macau results a tad softer than the Street's view and in line with UBS expectations, “investor attention is more shifted toward overcoming uncertainty in terms of end demand and potential for the government to pace new openings.”

“WYNN's opening date now more concrete on March 25, 2016 is reassuring. Company's sentiment on Vegas sounded less bearish vs. three months ago.”

Farley said Wynn has received all of its final request for 7,000 construction workers from the Macau government.

“Budget unchanged at $4.1B. We believe MPEL's opening in Q4 and ramp in Q4 could determine govt's appetite for faster pace of openings.”