Wynn Macau EBITDA Estimates Get a Haircut With Analysts Citing Slack VIP Hold
Posted on: October 7, 2019, 08:45h.
Last updated on: October 7, 2019, 11:47h.
Sluggishness among VIP gamblers and slack high-end turnover in Macau are expected to pressure results at Wynn Resorts, Ltd.’s (NASDAQ:WYNN) China business, according to a note out Monday from Bernstein analysts.
The analysts slashed their 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) forecast for Wynn Macau by six percent, while trimming their 2020 estimate by two percent, noting the gaming company’s third-quarter results should be weak all around, including in Las Vegas and Boston.
Low hold in direct VIP and overall soft high-end volumes have negatively impacted results,” said the Bernstein analysts. “The high-end remains soft due to a variety of macro factors.”
Last month, the operator of Wynn Macau and Wynn Palace forecast adjusted property EBITDA of $225 million to $248 million for July and August, well below the $339.4 million notched in the same two-month period in 2018.
In a filing with the Securities and Exchange Commission (SEC) revealing those lower projections, Wynn explicitly said, “unusually low hold in our direct VIP operations” in Macau due to factors such as the trade dispute between the US and China and the ongoing geopolitical demonstrations in Hong Kong.
For the third quarter, Bernstein expects Wynn Macau will post EBITDA of about $254 million, a drop of 28 percent on a year-over-year basis and a 13 percent slide from the second quarter. The research firm cited softness in the Chinese economy, the world’s second-largest; weakness in that country’s currency; and the trade spat with the US as the factors hindering the gaming company’s third-quarter results on the peninsula.
In the second quarter, Wynn relied on Macau for 70 percent of its revenue, meaning there is some burden on the company to make up for sagging revenue there in other markets, notably Las Vegas.
However, Wynn already warned that its third-quarter revenue and adjusted property EBITDA in Sin City will miss expectations due to lower table games win percentage, which is expected to come in well below the operator’s original forecast of 22 percent to 26 percent.
The Bernstein analysts noted the Wynn and Encore on the Strip, and the newly minted Encore Boston Harbor in Everett, Mass., failed to outperform in the July through September period due to disappointing table hold and ramping up of slot play at the New England property.
In July and August, Encore Boston Harbor’s first two full months of business, the property posted combined gross gaming revenue (GGR) of about $101 million, more than doubling rival MGM Springfield’s tally for those months. Wynn believes its New England property can generate $800 million in GGR in its first year.
While Macau remains a thorn in Wynn’s side, Bernstein, as is the case with other sell-side firms on Wall Street, is bullish on shares of Wynn.
“As a sector, Macau gaming’s current valuation is attractive for investors willing to hold volatility and play the Macau recovery inflection,” said the research firm. “Wynn Resorts and Wynn Macau remains our top picks based on risk/reward asymmetry in the space.”
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