The under construction Wynn Palace casino resort, on Cotai, is likely greatly to benefit the performance of Macau casino operator Wynn Macau Ltd once opened, says a note from brokerage Sanford C. Bernstein Ltd in Hong Kong.
“While having some cannibalising effect on its existing operation, Wynn Palace positions the company to be a market share taker with long-term growth prospects,” analysts Vitaly Umansky, Simon Zhang and Clifford Kurz wrote in a Friday note.
Fitch Ratings Inc had mentioned in a Tuesday announcement the risk that the opening this year of two casino resorts – namely Wynn Palace and the Parisian Macao from Sands China Ltd – was likely to lead to intensified competition.
Sanford Bernstein said on Friday in relation to the impact of Wynn Palace: “Market share for VIP [for Wynn Macau] is projected to increase by over 300 basis points from 2015 to 2018 (estimate) while mass share is projected to increase by over 400 basis points during this period. Further, we forecast the company’s EBITDA [earnings before interest, taxation, depreciation and amortisation] to grow at 24 percent compound annual growth rate [between 2015 and 2018].”
The US$4.1-billion Wynn Palace casino resort had been scheduled to open on June 25, after a plan to launch it on March 25 was dropped. Company chairman Steve Wynn last week said the property was now likely to open in August.
There has been an ongoing discussion among investment analysts regarding the potential and speed of performance ramp up of Wynn Palace once the property is open for business.
“Management’s expectation for the Wynn Palace property [disclosed last week] seems very bullish, with the US$630 million to US$850 million 2017 property EBITDA forecast 94 percent to 162 percent higher than our estimated EBITDA of US$324 million for 2017,” Japanese brokerage Nomura said in a note last week. Deutsche Bank Securities Inc has expressed similar concerns.
Other analysts have had a more positive view on the forecasts provided by Wynn Macau. “We are particularly focused on the strong expectations for the [Wynn] Palace and resulting earnings growth and cash flow inflection,” Telsey Advisory Group analysts David Katz and Brian Davis wrote in a note issued last week.
“Wynn Palace provides the company with robust long-term growth prospects and what may likely be the most iconic property in the market,” the Sanford Bernstein team said in its Friday note.
It added: “[It] will nearly triple the company’s footprint in Macau.”
Bernstein also updated its “positive view” on Wynn Macau and revised upward its adjusted EBITDA forecasts for the company. It now expects Wynn Macau to post EBITDA of HKD5.77 billion in 2016 and of HKD7.88 billion in 2017. It noted that Wynn Macau “is one of the premier operators in Macau with best-in-class management that is delivering outsized performance” compared to its share of total gaming tables in the market.
“While the stock has had a strong run year-to-date (+31 percent), we still see upside over the next 12 months,” the brokerage stated.
