Casino operator Wynn Macau Ltd has the potential to generate this year US$917 million in adjusted earnings before interest, taxation, depreciation, amortisation and rent (EBITDAR), or 2.8 percent above a previous best-case scenario, says a Friday note from CreditSights Inc, a division of the Fitch group.
“This exceeds both our original base (US$632 million) and bull (US$892 million) cases,” stated the institution.
It reflected “meaningful margin improvements,” with EBITDA margins in the second quarter this year up 300 basis points versus the same period in 2019, i.e., pre-pandemic.
Wynn Macau Ltd runs the Wynn Macau property on the city’s peninsula, and Wynn Palace in Macau’s Cotai district.
CreditSights said there had been a shift in gaming-product mix for the gaming operator, to “the more margin-friendly mass market,” as well as “higher-than-expected business volumes, and improved cost efficiencies”.
Based on its updated forecast, it suggested Wynn Macau Ltd’s gross leverage might “settle around approximately 7.4 times by year-end 2023”.
Wynn Macau Ltd last week reported a net profit of US$61.0 million for the second quarter, versus a first-quarter net loss of just under US$49.8 million.
Wynn Macau Ltd’s second-quarter adjusted EBITDAR rose 58.0 percent sequentially, to US$246.2 million. That compared with a negative figure of US$90.3 million a year ago.
“Wynn’s Macau business continues to benefit from a healthy recovery, which has accelerated on a monthly basis since China lifted its Covid travel restrictions in early January,” stated CreditSights, referring first to the United States-based parent, Wynn Resorts Ltd.
The financial institution also observed, referring to the Macau operation: “Notably, Wynn’s daily mass drop reached 120 percent of 2019 levels in July.”
“Given the trends to date, and our constructive view on the [Macau] region, Wynn Macau Ltd’s bonds… offer the most attractive yield” for investors “among the U.S. operators in the region,” stated CreditSights.
It said that as a point of reference, Macau operator MGM China Holdings Ltd – which runs MGM Macau and MGM Cotai – had 5.875-percent notes due in 2026 offering 7.7 percent yield, versus Wynn Macau Ltd’s 5.5-percent notes maturing in 2026 at 8.2 percent yield.
Wynn Macau Ltd’s parent Wynn Resorts runs Wynn Las Vegas, in Las Vegas Nevada, and Encore Boston Harbor in Massachusetts. The parent is also a 40-percent equity partner in a Wynn Al Marjan Island, a gaming resort being developed in Ras Al Khaimah, in the United Arab Emirates.
CreditSights observed that Wynn Resorts had announced recently its wholly-owned subsidiary Wynn Las Vegas LLC had commenced a cash tender offer to purchase a portion of the Wynn Las Vegas 5.5-percent 2025 senior notes.
CreditSights mentioned that tender was capped at a principal amount of US$300 million, out of US$1.78-billion outstanding.
“We view Wynn’s cash position as more than adequate to fund the cash tender offer,” stated CreditSights.
