Wynn Macau misses profit estimates on slow start for new casino

The Macau unit of Wynn Resorts Ltd., the casino company founded by billionaire Steve Wynn, posted third-quarter profit that missed analysts’ estimates as its new USD4.4 billion project in the MSAR failed to lift betting revenue there.
Wynn Macau posted adjusted property earnings of $177 million before interest, taxes depreciation and amortization. That’s compared with the $182 million median estimate of seven analysts surveyed by Bloomberg.
Shares of the company dropped as much as 4.7 percent yesterday in Hong Kong trading, the most in more than two months.
Macau has registered three months of growth in gambling revenue after more than a two-year slump as new casino projects bring in tourists and casual gamblers with family-friendly features. Wynn, meanwhile, still appeals to high-stakes players and others at the premium-end of the mass market. Its new resort has been impeded by nearby construction.
“They’re off to a slower start than expected,” Trip Miller, managing partner of Memphis-based Gullane Capital Partners, said in an interview. Foot traffic at the new property may have been light due to construction around the resort. Its new resort may have also taken business from Wynn’s existing Macau casino, he said.
Total revenue for the Las Vegas-based Wynn Resorts rose 11 percent to $1.11 billion, according to a statement Wednesday. That also missed the $1.12 billion average of estimates compiled by Bloomberg. Wynn Resorts shares slid as much as 6.2 percent in late trading to $90.50.
Wynn Palace’s adjusted property earnings was $25.5 million before interest, taxes depreciation and amortization. Casino revenues for the third quarter were $146.7 million. Net revenue from its other property, the Wynn Macau resort, was $518.1 million, a 12 percent drop from the same period a year earlier. Adjusted property earnings before interest, taxes deprecation and amortization fell 7.3 percent to $151 million. VIP gaming revenue dropped 5.7 percent year-on-year at the Wynn Macau for the third quarter, while mass revenue fell 13 percent.  In Las Vegas, sales rose 3.9 percent to $427.1 million, while adjusted Ebitda gained 10 percent to $128.9 million.
The “initial knee-jerk reaction will likely be negative” as cannibalization at Wynn Macau was more than expected with bigger drops in both VIP and mass gaming revenue than the industry, JPMorgan Chase & Co. analyst DS Kim wrote in a note yesterday. The company management’s tone on Wynn Palace has also turned “more cautious,” he said.
Wynn acknowledged on a conference call that business at the new resort was developing more slowly than expected. Construction at other resorts, and work on a light rail system in Macau, impeded access to the property, he said.
The company is working with the Macau government to make improvements, such as crosswalks, to make it easier to get to. Wynn also said he was expanding a casual dining restaurant at Wynn Palace to meet higher-than-expected demand.
“These very things that complicated our launch are the very things that will underwrite its future,” he said. “Having that light rail and being the first stop is a cool thing. So I’m looking forward to it.” Bloomberg