Falling VIP play as Wynn’s Macau profit slides 16 pct
Casino operator Wynn Macau Ltd has reported a 16.0-percent fall in year-on-year net profit attributable to shareholders for the first quarter. The company said net profit fell from about US$227.0 million in the first quarter of last year to US$190.6 million for the first three months of this year.
The numbers were filed on Friday morning with the Hong Kong Stock Exchange under International Financial Reporting Standards (IFRS), rather than the United States Generally-Accepted Accounting Principles (GAAP) normally adopted by the U.S.-based parent Wynn Resorts Ltd.
On Thursday after New York market hours, Wynn Resorts had told the Nasdaq that it had swung back to profit in the first quarter of this year. Its net profit to shareholders was US$104.9 million, compared to a loss of US$204.3 million in the first quarter last year.
The group said that the first-quarter balance sheet this year had benefited from the absence of a one-off settlement of US$463.6 million in the same quarter last year in order to settle a dispute with Aruze USA Inc and Japan’s Universal Entertainment, regarding the 2012 cancellation of a stake in Wynn Resorts.
Wynn Resorts said that group-wide operating revenues in the first three months of 2019 – for Macau and Las Vegas – were US$1.65 billion, down 3.7 percent from the US$1.72 billion reported in the first quarter last year. There was a higher rate of deterioration in the Las Vegas market than the Macau one, based on that indicator.
The parent breaks down its financial reports according to the properties it controls, which includes two casino resorts in Macau; Wynn Macau on the Macau peninsula and Wynn Palace in Cotai, as well as Wynn Las Vegas in Nevada in the U.S.
Encore Boston Harbor, a new US$2.6-billion property in the U.S. state of Massachusetts, was recently given licensing go-ahead by regulators there, but is yet to launch.
Wynn Resorts told Nasdaq that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) at the Wynn Macau property (pictured) fell US$45.9 million– a 21.9 percent shrinkage in year-on-year terms – to just under US$163.9 million. At Wynn Palace such adjusted EBITDA grew by US$10.7 million to nearly US$222.6 million the first quarter of 2018, a 5-percent improvement.
Andrew Lee and Lois Zhou of Jeffries Hong Kong Ltd said in a Thursday note: “Wynn Palace beat our estimates (higher VIP win rate) and offset lower Wynn Macau earnings.”
In its explanation of the results, the parent said its casino revenue in Macau decreased primarily due to lower VIP turnover at Wynn Palace and Wynn Macau, partially offset by increased VIP win as a percentage of turnover at Wynn Palace.
In the important VIP segment, turnover for the three months to March 31 plummeted by 40.3 percent in year-on-year terms at Wynn Macau and by 17.9 percent at Wynn Palace. Table win rates at both casino resorts improved.
Construction disruption
Ian Coughlan, president of Wynn Macau Ltd, said on the parent’s earnings conference call that revamp work at the Wynn Macau venue downtown had been a factor affecting quarterly earnings. “We have anywhere from 80 to 100 rooms out at any given time in Encore [Macau] and we’re getting them back progressively.”
At Wynn Macau, table games turnover in VIP operations was US$10.19 billion, down from US$17.09 billion for the first quarter of 2018.
VIP table games win as a percentage of turnover was 2.90 percent, which was within the expected range of 2.7 percent to 3.0 percent, but above the 2.61 percent experienced in the first quarter of last year.
At the Wynn Palace, table games turnover from VIP operations was just over US$12.6 billion, falling from just under US$15.4 billion for the first quarter of last year. VIP table games win as a percentage of turnover was 3.91 percent, above the 2.60 percent experienced in the prior quarter.
Analysts DS Kim and Christopher Tang of JP Morgan Securities (Asia Pacific) Ltd said in a Friday note: “Wynn’s GGR market share continued to slip, to 15.5 percent in the first quarter, from 15.9 percent in the fourth quarter 2018, and 17.4 percent in the third quarter 2018.”
They added: “This was driven by share losses in every segment… which in our view was primarily due to its outsized exposure to high-end segments (not just VIP, but also within mass/slots’ sub-segments) rather than property-specific issue.”
Matt Maddox, president and chief executive of Wynn Resorts said on the group’s earnings conference call on Thursday: “We definitely lost some share in premium mass and the premium mass business around town [Macau] was down.”
He added: “Core mass … was up over 13 percent [year-on-year] but that was not enough for us to keep up our share in the market.”
Overall operating revenue slid by 15.3 percent at the Wynn Macau property, a US$94.4-million fall to US$523.9 million in the quarter ended March 31.
Wynn Palace saw a US$60.8-million growth in operating revenue, about 9.1 percent, to US$726.6 million from the US$665.8 million reported in the first quarter last year.
In Macau, Wynn Resorts owns about 72 percent of Wynn Macau Ltd, which includes the operations of the Wynn Palace and Wynn Macau casino resorts.
The Wynn parent company announced a cash dividend of US$1 a share, payable on May 30, 2019 to stockholders of record as of May 22, 2019.
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