GGRAsia – Cotai ramp-up key for rating of Wynn Resorts: Moody’s

Cotai ramp-up key for rating of Wynn Resorts: Moody’s

Oct 07, 2016 Newsdesk Latest News, Macau, Top of the deck

Las Vegas-based Wynn Resorts Ltd is one of four U.S.-based gaming companies that needs to improve leverage in order to maintain an existing credit rating, says a note from Moody’s Investors Service Inc. The other three are U.S.-focused casino operators: Penn National Gaming Inc; Pinnacle Entertainment Inc; and Affinity Gaming LLC.

Wynn Resorts currently holds a “Ba2 negative” rating from Moody’s. Wynn Resorts on August 22 opened – via its local unit Wynn Macau Ltd – the US$4.2-billion, 1,700-room casino resort Wynn Palace (pictured) in Macau’s Cotai district.

“For Wynn Resorts, the negative rating outlook also reflects Moody’s concern that the opening of Wynn Palace will add to the oversupply conditions that currently exist in Macau, at a time where there is already a lot of uncertainty about overall demand trends in that market,” said the ratings institution.

It added: “The performance of Wynn Palace will be a key factor to any rating decision or outlook revision.”

In a note on October 3, Japanese brokerage Nomura said there appeared to be a slow ramp-up of Wynn Palace’s business. The institution stated: “We continue to remain cautious on Wynn Macau [Ltd], especially with the stock trading at stretched peak-cycle valuation of 16x 2017 forecast for enterprise value/earnings before interest, taxation, depreciation and amortisation [EBITDA]”.

The brokerage added that market consensus forecast for Wynn Palace’s 2017 EBITDA was circa US$439 million, compared to Nomura’s more conservative estimate of US$296 million.

In a follow up note on Thursday, Nomura said: “Of all the Macau casinos’ third-quarter results, we believe investors should focus more on Wynn [Macau Ltd’s] third-quarter results, likely to be released around mid-October. Wynn’s third-quarter numbers will be the first data point that allows investors to gauge the earnings performance of its newly opened Wynn Palace, which has 40 days of operations in third-quarter 2016.”