Casino operator Wynn Resorts Ltd said it has delayed the opening of its US$4.1 billion Wynn Palace resort (pictured) on Cotai by three months. Wynn Resorts is the parent company of Macau-based gaming operator Wynn Macau Ltd.
Wynn Resorts said it was notified on Wednesday by its general contractor, Leighton Holdings Ltd, “that the Wynn Palace project in the Cotai area of Macau will not be ready to open by the projected early completion date of March 25, 2016”.
“The revised opening date for the project is currently June 25, 2016,” the parent company said in a press release. In filings to the U.S. Securities and Exchange Commission, Wynn Resorts had mentioned a first half 2016 opening for Wynn Palace. But company chairman Steve Wynn said in a July conference call that management aimed to open the new casino-resort on March 25, 2016.
Wynn Resorts shares on Wednesday closed at US$61.31 on the Nasdaq, down 0.41 percent.
Several investment analysts have mentioned the possibility of delays for under-construction Cotai resorts, citing the slow pace at which the Macau government issues necessary permissions for different stages of building work and a shortage of construction workers.
“This could be surprising to the market, as the company just set a March opening date not long ago in July 2015, which at the time was a slight surprise (we assumed a late second quarter 2016 opening pre-July, and it was unusual to commit to an opening date so far ahead,” said UBS Securities Asia Ltd in a note on Thursday.
UBS had estimated Wynn Palace to open in mid-second quarter. “Versus our estimates this represents a 1.5-2 month delay,” said analysts Anthony Wong and Angus Chan.
“Pushing back opening by [about] two months versus current UBS estimate will likely have a small negative impact (below 5 percent) to 2016 estimate EBITDA [earnings before interest, taxation, depreciation and amortisation], as two months less of revenue share gain will be partially offset by two months less of incremental operating costs (and later shifting of staff),” said Mr Wong and Mr Chan.
Wynn Palace will include a 1,700-room hotel, a large lake with fountain display and a gondola ride around the grounds, meeting space, a casino, a spa, shops, and food and drink outlets.
David Bain of brokerage Sterne Agee CRT said conversations it had with Wynn Resorts management indicated the delayed opening timeline “was not instigated by Wynn and not related to market conditions, table allocations, labour issues or otherwise – solely a delay in construction completion by Leighton”.
“We believe there is no change to the US$4.1 billion construction budget,” said Mr Bain.
Analysts Carlo Santarelli and Danny Valoy of Deutsche Bank Securities Inc said they “don’t think the three month delay is entirely meaningful from a fundamental perspective”.
“We continue to believe Wynn Palace will be the next property to open in the [Macau] market… As it pertains to covenants, we do not believe the Palace delay will impact the maximum leverage covenant, especially given the flexibility provided by the new credit agreement,” the analysts said in a note on Wednesday.
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”China has been strengthening the control over capital flow, and the impact of that has already been reflected [on Macau’s gaming revenue trend]. There should not be any bigger impact from the new… legislation [on the mainland] … on the gaming revenue trend here”
Wilfred Wong Ying Wai
President of Macau casino operator Sands China