3Q profit halves at Wynn Macau Ltd with VIP weak

Nov 07, 2019 Newsdesk Latest News, Macau, Top of the deck, World  

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Profit at Macau casino operator Wynn Macau Ltd more than halved year-on-year in the third quarter, on casino revenue that slipped 19.7 percent.

Such profit was US$103.7 million, compared to US$223.50 million, a decline of 53.6 percent year-on-year according to the results lodged with the Hong Kong Stock Exchange prior to the start of Thursday trading.

Casino revenue went down to US$906.5 million, from nearly US$1.13 billion in the prior-year period.

“We delivered solid financial results in the third quarter, despite negative hold impact in both Macau and Las Vegas,” said Matt Maddox, chief executive of the parent Wynn Resorts Ltd, in prepared remarks contained in the Hong Kong filing.

He added: “In Macau, the investments we have made position us well to compete in any market environment, as evidenced by record mass table win in the quarter.”

But weakness in the VIP segment – seen market-wide in Macau in the third quarter – had an adverse effect on Wynn Macau Ltd’s business, said a Wednesday memo from JP Morgan Securities (Asia Pacific) Ltd.

The Macau unit’s gross gaming revenue (GGR) “fell 9 percent quarter-on-quarter and 21 percent year-on-year and its market share fell 90 basis points quarter-on-quarter to 14.2 percent, which was obviously driven by VIP weakness,” said analysts DS Kim, Jeremy An and Derek Choi.

The analysts added regarding the Macau unit’s VIP gambling volumes: “Its rolling volumes fell 18 percent quarter-on-quarter, versus industry’s -10 percent; while Wynn [Macau Ltd] increased its share in mass (+4 percent quarter-on-quarter, versus industry’s +2 percent).”

Analysts Andrew Lee and Lois Zhou of Jeffries Group LLC said in a memo after the Wynn Macau Ltd quarterly numbers, referring to house-managed rather than junket-supplied high roller players: “Similar to second quarter 2019, management noted low direct-VIP hold, with this leading to -US$22 million impact this quarter.”

Expenses down, revenues too

Total operating revenues at Wynn Macau Ltd declined 18.1 percent in the three months to September 30, to US$1.07 billion, from US$1.31 billion.

Operating costs and expenses actually fell 13.0 percent, to US$914.8 million, from US$1.05 billion.

At Wynn Macau, on the city’s peninsula, a venue that opened in 2006, adjusted third-quarter property earnings before interest, taxation, depreciation and amortisation (EBITDA) were US$139.0 million for the third quarter of 2019, a 24.0 percent decrease from US$182.9 million in the prior-year quarter.

Third-quarter adjusted property EBITDA at Wynn Palace – the Cotai venue that launched in 2016 –were US$162.2 million, a 28.3 percent decline from US$226.1 million in the third quarter of 2018.

At Wynn Macau, table drop in mass-market operations was US$1.32 billion, an 11.5 percent increase from US$1.18 billion for the third quarter of 2018. Table games win in mass market operations was US$272.5 million, an 8.9 percent increase from US$250.2 million in the prior-year period.

At Wynn Palace, third-quarter table drop in mass-market operations was US$1.30 billion, a 9.2 percent increase from US$1.19 billion in the third quarter of 2018. Table games win in mass market operations was US$324.2 million, a 5.2 percent increase from US$308.1 million a year earlier.

VIP slips

But both Macau properties saw a sharp decline in VIP gambling business year-on-year.

At Wynn Macau, table games turnover in VIP operations was US$8.02 billion, a 42.5 percent decrease from US$13.97 billion for the third quarter of 2018.

At Wynn Palace, VIP table games turnover was US$10.52 billion, a 32.3 percent decrease from US$15.53 billion for the same quarter a year earlier.

Total casino revenues from Wynn Macau were US$408.8 million for the third quarter, an 18.8 percent decrease from US$503.6 million for the prior-year quarter.

Overall casino revenues from Wynn Palace were US$497.7 million for the reporting quarter, a 20.4 percent decrease from US$625.6 million for the third quarter of 2018.

The Wynn Macau Ltd numbers are filed under international financial reporting standards, rather than the generally-accepted accounting principles (GAAP) used by the United States-based parent Wynn Resorts.

The U.S. parent – which operates a resort complex in Las Vegas, Nevada, and one at Boston Harbor, Massachusetts – slipped to a third-quarter loss.

On a U.S. GAAP basis, such net loss was US$3.5 million – a loss of US$0.03 per diluted share – for the third quarter of 2019, compared to net income of US$156.1 million, or US$1.44 per diluted share, in the third quarter of 2018.

The change was “primarily driven by a decrease in VIP table games win at our Macau operations,” said the parent in its filing to Nasdaq.

Mr Maddox mentioned in the Hong Kong filing that the Macau unit was “on track” to launch the “renovated West Casino at Wynn Macau beginning in late 2019, further solidifying the property as the peninsula’s marquee integrated resort.”

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