Wynn Resorts, Limited WYNN is likely to benefit from its Macau operations and non-gaming revenues boosting strategies and expansion initiatives. Also, the company’s strong balance sheet will help tide over uncertainties stemming from the coronavirus pandemic. However, dismal traffic due to the pandemic remains a concern.
Let us delve deeper into factors highlighting why investors should hold on to the stock for the time being.
Wynn Resorts derives a solid share of revenues from Macau (the largest gaming destination in the world). Despite the coronavirus pandemic, the company is confident about its prospects in Macau. Apart from the gaming business in Macau, it has been increasingly focusing on driving non-gaming revenues.
Notably, the company has been offering various promotional allowances and undertaking initiatives to attract gambling patrons. Also, it is undertaking several initiatives and building newer concepts to boost non-gaming revenues in the region. Moreover, opening of the world's longest sea-crossing bridge and tunnel in the prior year, which connects Macau to Hong Kong as well as mainland China's Pearl River Delta, is likely to be beneficial to casino operators.
Meanwhile, the government of China is considering measures to support Macau’s economy by introducing favorable policies which are expected to improve visitation patterns and boost tourism and traffic in the region. These include approval of Macau’s maritime expansion plans, which are expected to aid shipping and tourism.
Meanwhile, the company stated that it has ample liquidity, which will help it survive in an extended zero-revenue scenario. As of Apr 30, 2020, the company’s global cash and liquidity totaled nearly $3.4 billion. Globally, cash interest expense and its scaled down CapEx program require nearly $1.7 million per day. Also, the company’s cash burn rate is nearly $7.8 million per day at the current scenario. So, the company can handle a no-revenue-full-pay environment until at least third-quarter 2021. Although the company’s long-term debt at the end of first-quarter 2020 stood at $11.37 billion compared with $10.5 billion as of Dec 31, 2019, it has no debt maturing prior to 2022. At the end of first-quarter 2020, the company had debt-to-capital ratio of 0.9, which indicates that its debt levels are manageable.
Wynn Resorts’ financials in 2020 are likely to be impacted by the coronavirus outbreak. Even though the company has resumed operations at majority of its gaming properties, traffic is expected to be affected by social-distancing protocols. Owing to the uncertainty of the crisis, the company has suspended quarterly dividend payouts.
Moreover, Wynn Resorts’ board of directors and top executives have decided to forgo 33-100% of their salaries in the light of the coronavirus-induced economic downturn. Matt Maddox, the CEO, has agreed to give up 100% of his salary in exchange for shares for the rest of 2020.
So far this year, shares of Wynn Resorts have plummeted 46.6% compared with the industry’s 27.9% decline.
Wynn Resorts, which shares space with Boyd Gaming Corporation BYD Red Rock Resorts, Inc. RRR and Las Vegas Sands Corp. LVS in the Zacks Gaming industry, carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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