Wynn urges end to uncertainty as profit slides

Signage for the Wynn Palace project, developed by Wynn Resorts Ltd., is displayed on a fence outside the construction site in Macau

Billionaire Steve Wynn has called on Macau’s government to provide clarity on plans for the Chinese city as his casino company cut its dividend and China’s anti-corruption drive slashes profits.
Wynn Macau Ltd. reported adjusted property earnings before interest, taxes, depreciation and amortization, or Ebitda, dropped 45 percent to USD212.3 million during the first quarter. That missed a median estimate of $230.5 million from six analysts surveyed by Bloomberg.
VIP gambling in Macau has been hit by President Xi Jinping’s campaign on graft that snared thousands of officials, prompting many wealthy Chinese to cut back on conspicuous consumption and stay away from the world’s largest gambling hub. As revenues slumped, the city’s leaders have given little detail about the allocation of workers and gaming tables, casting doubt over a slew of new offerings planned by the six major casino operators, including a new Wynn Macau property.
“There’s no question that uncertainty is the plaguing word of the day in Macau,” the founder of Wynn Resorts Ltd. said during a teleconference for its earnings Tuesday. “Hopefully, our government in Macau will calm that down and put some certainty back into the picture.”
The Macau unit of Las Vegas-based Wynn Resorts fell 7.6 percent to HKD16.14 at the close of trading in Hong Kong, the biggest decline since March 17. MGM China Holdings Ltd. was down 2.7 percent, Galaxy Entertainment Group and SJM Holdings Ltd. both fell about 2 percent, and Sands China Ltd. slipped 0.6 percent. The benchmark Hang Seng Index lost 0.2 percent.
To conserve cash, Wynn Resorts announced it is cutting its dividend to 50 cents a share, from the $1.50 it paid in February. Wynn Macau, whose revenues accounted for 65 percent of the group’s total, aims to open a second property in March 2016.
Steve Wynn highlighted several uncertainties in the Chinese city. He’s unsure how many workers the government would allow the company to hire to build its $4 billion Wynn Palace and how many gambling tables it would get for its new resort.
“We’ve struggled with adjusting our work schedule on construction to the permissions we’ve been given for workers on construction by the government,” he said.
The Macau government has responded to its citizens’ pressure to avoid overcrowding in Macau which “leaves us in a bit of a quandary,” the billionaire said. “We never know quite what to expect these days,” he said. The government is studying curbs on mainland tourists to ease overcrowding.
Wynn’s employees in Macau are counting on the benefits from the company’s new project, and those uncertainties “may erupt into protests against the government if it isn’t settled soon,” the executive said. The former Portuguese colony last year saw a record number of demonstrations by workers demanding better pay and welfare at the city’s casinos. Another one has been planned for May 1 during the Labor Day holiday.
Wynn Macau posted a 38 percent decline in revenue to $705.4 million. Table games revenue in the VIP segment more than halved during the period, while it fell 7 percent for the mass market, the company said.
Steve Wynn said it’s “impossible” to predict how long the depression of the VIP market would last. Wynn Resorts’ “earnings power proved to be underwhelming versus the most expected, which was disappointing given its market share gain during the quarter,” DS Kim, an analyst with JP Morgan Chase & Co., wrote in a note Wednesday. Wynn Macau showed “meaningful share gain” in the mass-market segment, while its new VIP rooms showed strong performance, he wrote.
Profit excluding some items fell to 70 cents a share, Wynn Resorts said in a statement. Analysts were projecting $1.19, the average of 10 estimates compiled by Bloomberg. Daryl Loo and Stephanie Wong, Bloomberg