Casino firm Wynn Resorts Ltd had to consider the group’s “leverage profile in Macau” before being able to make any commitment on timing for Wynn Macau Ltd to return to paying dividends, said the parent’s chief executive Craig Billings (pictured in a file photo), on its call following the fourth-quarter earnings announcement on Wednesday.
The CEO had been asked whether it might be possible to reinstitute Wynn Macau Ltd dividends within “12 to 18 months”.
In November the parent had declared a cash dividend of US$0.25 per share, payable on November 30. Wynn Resorts had announced earlier that year the resumption of its quarterly dividend programme.
Wynn Macau Ltd paid no dividends for either 2020, 2021 or 2022, according to relevant annual reports filed with the Hong Kong Stock Exchange. The firm runs the Wynn Macau property on the city’s peninsula, and Wynn Palace in the Cotai district.
Mr Billings said on the latest call, regarding its financial position in Macau: “We have the debt maturity later this year there. We need to think about our leverage profile in Macau and what that longer term leverage profile should be.”
The group CEO added, referring to capital commitments to the Macau government under Wynn Macau Ltd’s fresh 10-year Macau gaming concession that started in January last year, and to several years of Covid-related travel restrictions that had constrained the Macau market: “We have some capital that we need to put in the ground there. We had nearly, three years of closure and cash burn.”
The group had to look at “how… the capex [capital expenditure] plans” relating to the Macau concession “come together in terms of the timing of capital deployment, which we’re studying and learning more about as we go through the design and development process every day”.
Mr Billings noted: “Dividends are the cornerstone of our capital return strategy. We are looking very closely at it [for Macau] and we’ll figure it out in due course.”
Earlier on the call, Julie Cameron-Doe, the parent’s chief financial officer (CFO), said: “In terms of capex in Macau, we’re currently advancing through the design and planning stages on our concession commitments, and as we noted the past few quarters, these projects require a number of [Macau] government approvals, creating a wide range of potential capex outcomes in the near term.”
She added: “As such, we expect capex related to our concession commitments to range between US$350 million and US$500 million in total between 2024 and the end of 2025.”
Wynn Macau Ltd liquidity, China macro
The CFO stated the group as a whole had global cash and credit revolver availability amounting to nearly US$4.5 billion as of December 31. This was comprised of US$2 billion of total cash and available liquidity in Macau, and approximately US$2.45 billion in the United States.
Mr Billings was asked on the call about competition for players in the Macau premium mass segment.
He stated: “Competition for premium mass customers has been fierce forever and a day. So it’s really nothing new.”
The CEO added: “We’ll stay true to who we are and be really, really disciplined, including on [player] reinvestment, because at the end of the day I don’t think the bank [the lenders] takes market share. I think they take cash. And so we’re really focused on generating cash and EBITDA” (earnings before interest, taxation, depreciation and amortisation).
In terms of fourth-quarter 2023 performance, Mr Billings said the group was “clearly being disciplined on opex” (operating expenditure).
He stated: “Our opex in the quarter was, I think about 14 percent below fourth-quarter 2019,” a pre-pandemic trading year, “and our margins were some 140 basis points higher”.
Ms Cameron-Doe said that while fourth-quarter operating expenses had increased by “US$15 million sequentially,” the Macau operation had “more overtime pay related to holidays because there were nine public holidays in the quarter versus… just two in the previous quarter”.
Mr Billings was asked on the call about so-called ‘macro risk’ in Macau related to the performance of the overall economy in mainland China, the largest feeder market for Macau’s tourism sector.
He said that in terms of the Macau market’s comeback, “we’re clearly already at levels that allow us the financial and operating flexibility to plan for [a] longer-term time horizon”.
He added: “I think it is well observed, maybe not well understood [by the investment community as a whole] that Macau’s trajectory does seem to be decoupled from the broader China macro.”
He added, referring to the global financial crisis 15 years ago: “I think you saw that in 2009 as well.”
(Updated 10.45am, Jan 8)
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