(REUTERS/Fred Prouser) Wynn Resorts, the casino and hotel company helmed by billionaire Steve Wynn, getting absolutely obliterated in after hours trading. The stock is down 10%.
Wynn reported after the bell Tuesday afternoon and disclosed that it would be cutting its dividend to $0.50 a share.
Why Wynn is suffering couldn't be more clear. It's Macau.
The island, once the world's gambling Mecca, has seen casino revenues collapse almost 50% from this time last year.
Why? Chinese President Xi Jinping start an anti-corruption drive last year that has high-rollers scared of spending money on the island and the businesses that served them closing at a devastating rate. Retail gamblers face visa and spending restrictions as well.
In this environment, Wynn Macau is suffering along with the rest of the island, and Wynn's Las Vegas operations don't come even close to making up for that.
"Net revenues for the first quarter of 2015 were $1,092.2 million, compared to $1,513.6 million in the first quarter of 2014. The decline was the result of a 37.7% net revenue decrease from our Macau Operations, partially offset by a 1.6% increase in net revenues from our Las Vegas Operations. Adjusted property EBITDA (1) was $323.0 million for the first quarter of 2015, a 34.7% decrease from $494.6 million in the first quarter of 2014."
Xi's anti-corruption drive shows no signs of abating, and Macau officials most recently announced that they're going to put a cap on visitors to the island. That means casino revenues won't be able to grow their way into the black with more retail foot traffic.
What's more, Wynn says that it remains committed to building a new property in Macau.
"The Company is currently constructing Wynn Palace, a fully integrated resort containing a 1,700-room hotel, performance lake, meeting space, casino, spa, retail offerings, and food and beverage outlets in the Cotai area of Macau," the company wrote in its earnings release. "In July 2013, we signed a $2.6 billion guaranteed maximum price (GMP) contract for the project’s construction costs. The total project budget, including construction costs, capitalized interest, pre-opening expenses, land costs and financing fees, is approximately $4.1 billion. We expect to open our resort on Cotai in the first half of 2016."
Question is, how are they going to fill the space?
This is the table you really need to see to understand what's going on:
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