GGRAsia – Steve Wynn exit of limited impact on Macau ops: analysts

Steve Wynn exit of limited impact on Macau ops: analysts

Feb 07, 2018 Newsdesk Latest News, Macau, Top of the deck

The resignation of Steve Wynn (pictured) as chief executive and chairman of Macau casino operator Wynn Macau Ltd as well as of its U.S. parent Wynn Resorts Ltd is likely to have little adverse effect on Macau gaming operations or the firm’s chances of extending its Macau gaming rights after expiry of its current concession in 2022, several analysts separately noted.

In a Wednesday memo, brokerage JP Morgan Securities (Asia Pacific) Ltd suggested the resignation of Mr Wynn would have “surprisingly limited” implications for Wynn Macau.

“This actually removes the potential risk related to a Macau gaming licence, as the ‘suitability’ test only applies to the directors or shareholders with 5 percent or above,” wrote JP Morgan analyst DS Kim. The note mentioned that Mr Wynn did not have any direct stake in Wynn Macau.

“Moreover, it is Ms Linda Chen, not Mr Wynn, who is required to remain executive director of Wynn Resorts Macau (wholly-owned subsidiary of Wynn Macau that has a gaming concession) to keep its gaming licence,” the JP Morgan note added.

The parent firm Wynn Resorts announced on Wednesday via the New York bourse that it had accepted the resignation of Mr Wynn as the group’s chief executive and chairman, an announcement made amid investigations into allegations of sexual misconduct by Mr Wynn against some former Wynn Resorts employees.

Mr Wynn has also resigned as the chairman, chief executive and an executive director of the Hong Kong-listed Wynn Macau Ltd with immediate effect, the firm stated to the Hong Kong bourse after trading hours on Wednesday. The announcement came following a halt that day starting at 9am in trading of the Macau unit’s stock. The shares will be available to the market again from tomorrow. Wynn Macau shares had lost nearly 17 percent of their value in the course of seven trading days subsequent to detailed news of the misconduct allegations.

Board changes

The Wednesday Hong Kong filing has also noted that Mr Wynn was stepping down from his positions as chairman and chief executive of Wynn Resorts (Macau) SA, the unit holding the Macau gaming rights. Matthew Maddox, appointed chief executive of Wynn Macau Ltd, will become chairman of Wynn Resorts Macau; Linda Chen, chief operating officer of Wynn Macau Ltd, will remain as president and executive director of Wynn Resorts Macau. The Hong Kong-listed company said additionally that the firm’s president Ian Coughlan will become a director in Wynn Resorts Macau.

At Wynn Macau Ltd, Allan Zeman has been named non-executive chairman and Maurice Wooden was appointed as a non-executive director. Mr Wooden is the president of Wynn Las Vegas LLC, a subsidiary of Wynn Resorts.

Brokerage Sanford C. Bernstein stated in the second of two notes on the topic issued on Wednesday: “Our view is that Maddox has a good grasp of Macau operations and frequently visits the operations on the ground there. Further, he has been one of the closest executives to Steve Wynn and will likely try to maintain his vision and attention to hospitality and customer experience. However, the shoes of Steve Wynn will not be easy to fill. Even with Maddox at the helm, Wynn will likely become a somewhat different operation, but time will tell.”

JP Morgan also said it believed that Mr Wynn’s resignation would pose limited impact on the operations at Wynn Macau, given its new developments in the city have been completed and same management team will be running the properties.

“We don’t want to downplay his [Mr Wynn’s] importance to the group’s strategic decision and vision, but we see limited impact on Wynn Macau’s fundamentals… we don’t expect negative impact on its patronage, as Wynn Macau doesn’t have MICE or corporate events exposure to begin with (unlike Wynn Resorts), while gambling patrons are unlikely to be affected by such reputational issues,” JP Morgan’s Mr Kim wrote.

Macau’s casino regulator, the Gaming Inspection and Coordination Bureau said in a Wednesday statement it acknowledged Mr Wynn’s departure from the Macau units. The bureau said it would “continuously review” the suitability of the major shareholders, directors and key employees of Macau’s gaming concessionaires.

The gaming regulator’s release mentioned a meeting between it, Macau’s Secretary for Economy and Finance Lionel Leong Vai Tac, and Linda Chen. The Macau authorities had requested Wynn Macau’s representative to make a detailed explanation of the allegations against Mr Wynn; the firm was also asked to inform the Macau authorities of updates and the results of investigations regarding the case.

Short-term impact

Both investment bank Credit Suisse AG and brokerage Morgan Stanley Asia Ltd share similar views to JP Morgan regarding the Macau gaming licence. In a Wednesday note, Credit Suisse suggested Mr Wynn’s resignation would have only “short-term impact” on the Macau operations.

“We believe that short-term [stock] overhang is eased as any possible negative news flow and investigation in Steve Wynn would no longer affect Wynn Macau,” Credit Suisse analysts Kenneth Fong and Lok Kan Chan wrote.

But the Credit Suisse team highlighted uncertainties around Mr Wynn departure from the Macau units, namely the “stability of existing management”, the “strength of Wynn Macau’s relationship with the Chinese/Macau government”, the “strategic direction of the overall company” and the “development of Wynn Palace phase 2”.

Bernstein said in its first Wednesday note on the Wynn group’s shake up that it was “less bullish” on Wynn Macau in the near term, given the uncertainties surrounding “further changes at the company management” and the “implications of the pending litigation in Nevada with respect to Wynn Resorts”.

“We remain optimistic about Wynn Macau’s ability to secure mass-market share in Macau. We do not see the issues [related to Mr Wynn’s resignation]… having any material impact on customer demand for Wynn Macau products and services (unlike in the U.S., where Wynn’s brand has already been tarnished by the allegations),” Sanford C. Bernstein analysts Vitaly Umansky, Zhen Gong and Cathy Huang wrote in a Wednesday note.

The Sanford Bernstein team also wrote: “The overhang of both Steve Wynn’s holdings in Wynn Resorts (12 percent of the shares) and Ms [Elaine] Wynn’s (9 percent) will concern some investors. The speculation surrounding whether Wynn [Resorts] will survive on its own without Steve Wynn’s leadership or whether the company could be acquired will certainly grow. At this time though, we will cannot discuss potential outcomes.”