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Macau Weighs Down Wynn's 4Q

Zacks Equity Research

Wynn Resorts Ltd.’s (WYNN) fourth quarter 2012 adjusted earnings of $1.17 per share fell short of the Zacks Consensus Estimate of $1.26 as well as prior-year earnings of $1.55 per share.

On a reported basis, earnings per share were $1.10 versus $1.52 in the comparable quarter last year. A poor VIP business in Macau was responsible for the downturn in earnings.

Net revenue declined 4.1% year over year to $1,289.1 million but beat the Zacks Consensus Estimate of $1,277 million.

Full year 2012 adjusted earnings of $5.36 fell short of the Zacks Consensus Estimate of $5.44 per share as well as the prior-year earnings of $5.58 per share . Net revenue slid 2.2% to $5,154.3 million, which missed the Zacks Consensus Estimate of $5,158 million.

Macau Operations

Net revenue at Wynn Macau was $898.7 million in the quarter, down 9.7% year over year, due to a decline in VIP table games. Performance at Macau was mainly hit by fierce competition and the company’s increased exposure to the sluggish VIP segment.

The table games turnover in the VIP segment declined 6.6% from the prior-year period to $27.7 billion. Though, VIP table games win as a percentage of turnover was 2.96% and within the expected range of 2.7-3.0%, it was lower than the year-ago level of 3.18%.

However, table games in the mass market category nudged up 1.0% to $699.3 million. Moreover, the mass market table games win rate was 31.1%, higher than the year-earlier rate of 30.4%.

Average daily rate at Wynn Macau was $314, down 2.6% year over year. However, the property’s occupancy level was 96.5%, up from 94.2% in the prior-year quarter. Combining both the effects, revenue per available room (RevPAR) slipped 0.3% year over year to $303.

Wynn Resorts is building a full scale integrated resort on the Cotai land at Macau and at present expects the project to cost around $3.5--$4.0 billion.

Las Vegas Operations

Wynn Resorts’ revenues from Las Vegas operations witnessed an upside of 12.1% year over year to $390.4 million as net casino revenues surged 23.8% from the prior-year period to $180.5 million. However, gross non-casino revenues increased 4.6% year over year to $258.0 million, buoyed by improved revenues from the hotel, and food and beverage segments, offset somewhat by lower retail and entertainment sales.

During the quarter, average daily rate inched up 1.6% to $254, but occupancy was almost flat at 79.2%. Both the matrices led to an increase of 1.8% in RevPAR.


Wynn Resorts doubled its quarterly cash dividend to $1.00 from 50 cents, which will be payable on Feb 28 to stockholders of record as of Feb 14.

Our Take

Wynn Resorts is witnessing weak operating results in Macau in contrast to solid business at Las Vegas for quite some time.  Fierce competition at Macau basically remains an overhang.

The company’s upcoming project at Cotai will also face extreme peer pressure from several Chinese casino operators and U.S.-based company Las Vegas Sands Corp. (LVS). Another U.S.-based casino giant MGM Resorts International (MGM) has recently received land approval to construct a casino at Cotai.

Recently, Las Vegas Sands also came up with its fourth-quarter 2012 results. While Las Vegas Sands’ earnings missed the Zacks Consensus Estimate, revenue beat the same. In terms of operating results, Las Vegas Sands’ performance in Macau was extremely solid while its domestic segment underperformed.

However, despite the tough scenario, long-term growth potential of the Macau market remains solid. Additionally, a boost in quarterly dividend should encourage investors about Wynn Resorts shares.

Wynn currently retains a Zacks Rank #3 (Hold). However, another casino operator worth a look includes Melco Crown Entertainment Limited (MPEL) carrying a Zacks Rank #1 (Strong Buy).

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