Gaming | Wynn plans new investment in Macau as earnings top estimates

Wynn Palace in Cotai

Wynn Resorts Ltd. plans to expand its newest property on Macau’s Cotai Strip after the project helped the company report better-than-expected earnings last quarter.

The next phase of the USD4.2 billion Wynn Palace, which opened in August 2016, will be developed on 11 acres, Chairman Steve Wynn said on a conference call. He didn’t provide details of the plans.

“The depth and the foundational strength of that market is real,” Wynn said Monday. “We have been encouraged by the government in conversations with them to file our plans for Phase 2, which we’re working on now.”

Wynn Macau Ltd., the company’s Chinese subsidiary, reported stronger-than-expected results for the fourth quarter. Property earnings before interest, taxes, depreciation and amortization totaled $376 million, up 66 percent from a year earlier and beating the median analysts’ estimate of $360 million.

“We’ve always been bullish about Macau,” the casino magnate said. “There is a lot of anecdotal happiness about Chinese New Year around the corner. There is a lot of money coming in.”

Shares of parent Wynn Resorts rose 8.7 percent to $195.23 Monday in New York after the company reported sales and profit that topped analysts’ estimates. Surging revenue from the Wynn Palace overshadowed lower results in Las Vegas. The fabled Nevada casino town is still recuperating after a deadly shooting rampage in October killed 58 people.

“Palace gained market share in both VIP and mass business, which should continue as Macau upcycle continues,” Morgan Stanley analysts led by Praveen K. Choudhary said in a note on Tuesday. Phase 2 of Wynn’s new property “should continue to drive future growth.” The company’s market share in Macau expanded to 17.2 percent, ahead of Morgan Stanley’s forecast of 16.4 percent, according to the note.

JPMorgan raised Wynn Macau’s target price to HKD31 from HKD27, and raised this year’s earnings estimate by 7 percent to reflect the stronger performance of Wynn Palace, analyst DS Kim said in a note yesterday. Gaming revenue at the Wynn Palace grew 25 percent from the third quarter, compared with 20 percent jump for the company as a whole, Kim wrote.

On the conference call, Wynn also expressed his optimism on the business after the gaming licenses of Macau’s six operators start to expire from 2020.

“We enjoy a good deal of confidence and we have been given reason to have confidence that our businesses will continue after the initial concession expiration date,” he said, “That confidence is based upon the kinds of conversations we have with the government.”

Wynn Resorts’ earnings, excluding some items, almost tripled in the fourth quarter to $144.3 million, or $1.40 a share, the company said Monday in a statement. Analysts had forecast earnings of $1.39 a share. Revenue grew 30 percent to $1.69 billion, beating estimates of $1.56 billion.

The company said it also benefited from the tax cuts that were enacted in the fourth quarter. The results reflect an estimated net tax benefit of about $340 million, it said. Daniela Wei and Jessica Brice, Bloomberg

Amid Las Vegas slump, Wynn wants fourth hotel

Casino magnate Steve Wynn is planning a fourth hotel in Las Vegas, a vote of confidence in a city still coping with lower attendance since an Oct. 1 mass shooting.

The new hotel will be built on the site of the former Frontier hotel, across Las Vegas Boulevard from Wynn’s two existing properties. It will feature approximately 2,500 hotel rooms and be linked to the Wynn and Encore hotels by an “air-conditioned umbilical hallway,” Wynn said on a conference call Monday.

Wynn Resorts Ltd. acquired the 38-acre site for USD336 million in December. The company is also building a hotel, convention center and lake resort, Paradise Park, behind its current properties.

“Hotels are extremely profitable,” Wynn said on the call. “With our room rates, we operate 50-to-60 percent margins in the hotels. So I want to add more rooms.”

Visitors to Sin City fell 1.7 percent to 42.2 million in 2017, the first decline in four years, according to preliminary data from the Las Vegas Convention & Visitors Authority. Declines were steeper in the last three months of the year after the shooting left 58 people dead. The gunman fired on a crowd below from a room on the 32nd floor of MGM Resorts International’s Mandalay Bay property, forcing casino operators to revisit their security procedures to make guests feel safe.

Room rates in Las Vegas rose 2.8 percent to an average of $129 a night last year, while the percentage of rooms occupied was little changed from a year earlier.

Wynn’s newest hotel rooms will feature 24-foot- wide window views, his-and-her bathrooms and 80-inch TVs. The company’s average room rates are rising and will likely hit $400 by the time all of the rooms under construction are finished, the executive said.

“You have to ask yourself, investment community, do you believe that Las Vegas, Nevada, will for the next decade or two continue to be a major destination city in the United States of America and the world?” Wynn asked. “This is a great city to be in. It’s a great city to develop in.” MDT/Bloomberg