GGRAsia – Premium mass helps Wynn Macau Ltd EBITDA break even 4Q

Premium mass helps Wynn Macau Ltd EBITDA break even 4Q

Feb 05, 2021 Newsdesk Latest News, Macau, Top of the deck, World

Wynn Macau Ltd’s adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) were back on positive ground in the fourth quarter of 2020, the Macau casino firm reported on Thursday.

The Macau unit – controlled by United States-based operator Wynn Resorts Ltd – saw its adjusted property EBITDA reach US$39.4 million in the fourth quarter, after a loss on adjusted property EBITDA amounting to US$112.1 million, for the three months ended September 30, 2020.

Wynn Macau Ltd reported in a filing to the Hong Kong bourse, a US$144.9-million fourth-quarter loss, compared to a US$182.0-million profit in the fourth-quarter 2019. The final-quarter 2020 net loss narrowed sharply from the nearly US$280.7-million net loss in the third quarter of that year.

Wynn Macau Ltd posted a fourth-quarter 2020 operating loss of US$74.3 million, much smaller than the nearly US$280.7-million such loss in the third quarter.

In commentary included in Wynn Resorts’ fourth-quarter results announcement, chief executive Matt Maddox said the rebound was due to “gradual and thoughtful easing of visitation restrictions” affecting travel between mainland China – a key consumer market for Macau casinos – and the special administrative region.

In the final quarter of 2020, Macau recorded about 1.88 million visitor arrivals, up by 150 percent from the third quarter, according to Macau government data. A third of those were travelling under the Individual Visit Scheme, which had been paused in late January 2020 amid the pandemic, and only resumed across the mainland in late September.

JP Morgan Securities (Asia Pacific) Ltd analysts DS Kim and Derek Choi said in a Thursday note, that while Wynn Macau’s fourth-quarter positive EBITDA was “quite decent” compared to market consensus that had expected US$30 million, “we can’t help but think that the print is backward-looking at this point, given likely lacklustre near-term trends into spring festival and first-quarter 2021, amidst recent – and temporary – travel curbs in China.”

Covid-19 outlook

Some industry insiders recently told GGRAsia of their concern that mainland-consumer demand for Chinese New Year trips to Macau was likely to be dampened by calls by some mainland authorities for citizens not to travel outside their home province or city during the festivities, to avoid the risk of spreading Covid-19.

Andrew Lee, a Hong Kong-based analyst at Jefferies LLC, said in his Thursday note that the Wynn group’s management had been “relatively more optimistic on the outlook,” for the Macau market, “compared with other operators’ recent comments”.

Mr Lee added, citing the Wynn group’s management: “Although Chinese New Year bookings are negatively impacted, management expects Chinese New Year to be similar to October’s Golden Week,” in terms of customer demand. That was a reference to a week-long holiday in mainland China, encompassing the country’s National Day on October 1.

In analysing events during the fourth quarter, the Wynn group CEO Mr Maddox, said the recovery was felt “with particular strength” in the premium-mass gaming business of the Macau unit, which runs the Wynn Macau complex on the city’s peninsula and the Wynn Palace casino resort (pictured) in the Cotai district.

The two properties posted in aggregate, mass-market table drop of US$1.29 billion in the fourth quarter, under half the pre-Covid-19 level reported in the same period a year earlier. It was nonetheless almost six times higher than in the July to September period of 2020.

VIP table game turnover in Macau was 5.6 times higher sequentially in the fourth quarter, at US$4.58 billion. However, it was only around a quarter of the pre-Covid-19 levels posted at the end of 2019.

In addition, the group said Wynn Palace had experienced a low win percentage relative to VIP turnover, at 1.97 percent, far lower than the normal range of 2.6 percent to 3.3 percent.

Finance, parent performance

The Macau unit told the Hong Kong bourse that its fourth-quarter financing costs were US$70.4 million – compared to US$47.6 million a year earlier.

Wynn Macau Ltd had outstanding debt of US$6.35 billion at the end of the year, up from US$5.96 billion three months earlier. The firm had US$2.43 billion in cash or equivalents as well as available borrowing capacity of US$343.5 million.

The group as a whole – which also runs Wynn Las Vegas in Nevada and Encore Boston Harbor in Massachusetts in the U.S. – recorded a quarterly net loss of US$178.6 million, much smaller than the loss of US$831.5 million for the July to September period.

Wynn Resorts finished full-year 2020 with an operating loss of US$1.2 billion, a far cry from the US$878.3-million profit posted in the previous year.

The parent affirmed there would be no dividend related to the group’s fourth-quarter operations, but that for year-end 2020 – encompassing the period prior to dividend suspension – the dividend had been US$1.00 per share, versus US$3.75 for full-year 2019.

Matt Maddox said in commentary with the results, that he was “encouraged by the progress” of the group, and believed it was on “the road to recovery from the pandemic”.

But Wynn Resorts noted in its results announcement in relation to Macau operations: “Certain Covid-19 -specific protective measures, such as limiting the number of seats per table game, increasing the spacing between active slot machines and visitor entry checks and requirements involving temperature checkpoints, mask wearing, health declarations and proof of negative COVID-19 test results remain in effect at the present time.”

“Measures that have been lifted or are expected to be lifted may be reintroduced if there are adverse developments,” the company warned.