Japanese brokerage Nomura says Wynn Macau Ltd’s expectations for its upcoming Cotai project seem “very bullish”. The brokerage stated in a note on Thursday it was sceptical on the pace of ramp-up forecast by the casino operator for the scheme.
The US$4.1-billion Wynn Palace (pictured) was scheduled to open on June 25, after a plan to launch it on March 25 was dropped. But company chairman Steve Wynn said on Wednesday the property was likely to only open in August.
“Management’s expectation for the Wynn Palace property seems very bullish, with the US$630 million to US$850 million 2017 property EBITDA [earnings before interest, taxation, depreciation and amortisation] forecast 94 percent to 162 percent higher than our estimated EBITDA of US$324 million for 2017,” the Nomura team stated.
The management of Wynn Resorts Ltd – the parent of Wynn Macau – presented the estimates on Wednesday at an investor presentation in Las Vegas, Nevada.
The brokerage added: “We have no doubt in the quality of the upcoming Wynn Palace property… but we are less confident in the profitability and the pace of ramp-up with the weak demand environment, excessive table capacity in Macau and the slow ramp at the two new openings [in Macau] in 2015.”
The two properties opening in Macau last year included: the second phase of casino resort Galaxy Macau, inaugurated in May by Galaxy Entertainment Group Ltd; and Studio City, majority-owned by Melco Crown Entertainment Ltd, which opened doors in October.
The Macau government on April 1 announced that market wide in Macau, accumulated casino gross gaming revenue (GGR) for the first quarter of 2016 was nearly MOP56.18 billion (US$7.03 billion), a 13.3 percent decline year-on-year. March was the 22nd straight month of citywide GGR retreat measured year-on-year.
The Nomura team also explained its “relative conservatism” regarding Wynn Palace with the “slow ramp” experienced by Wynn Encore Las Vegas. The property, opened in Nevada by Wynn Resorts in December 2008, failed to generate “any substantial incremental EBITDA until 2011, eight quarters after the opening,” Nomura stated.
Telsey Advisory Group had a different view on the forecasts provided by Wynn Macau and its parent. Following the announcement, the brokerage increased its 2017 EBITA forecast for Wynn Resorts to US$1.60 billion from US$1.35 billion.
“We are particularly focused on the strong expectations for the [Wynn] Palace and resulting earnings growth and cash flow inflection,” analysts David Katz and Brian Davis wrote in a note issued on Thursday.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China