GGRAsia – Wynn Macau 3Q EBITDA down 5 pct sequentially: CS

Wynn Macau 3Q EBITDA down 5 pct sequentially: CS

Oct 13, 2016 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator Wynn Macau Ltd could see its third-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) fall by 5 percent quarter-on-quarter, despite the August 22 opening of its US$4.2-billion Wynn Palace resort (pictured) on Cotai. That is the suggestion of banking group Credit Suisse AG in a Tuesday note.

The forecast was on the basis the casino firm had “normalised luck” on VIP gambling in the third quarter compared to above-average VIP hold in the prior quarter, and “slow ramp up of Wynn Palace,” said analysts Kenneth Fong, Isis Wong and Lok Kan Chan.

Deutsche Bank Securities Inc analysts Carlo Santarelli and Danny Valoy stated in a Wednesday memo, making reference to Wynn Macau Ltd’s legacy business at Wynn Macau, a property on the city’s peninsula and that opened in 2006: “Management has repeatedly noted that Wynn Macau has not experienced cannibalisation.”

Wynn Palace has contributed 40 days of operations to Wynn Macau Ltd’s third-quarter business.

Deutsche Bank stated in its latest note on the topic: “There has been much made of the slow-to-ramp Wynn Palace mass floor since the property opened on August 22, 2016. Since opening, management has repeatedly referenced that the property has been running at a mass fair share level akin to prior market openings.”

Mr Santarelli and Mr Valoy added – in reference to Wynn Palace, which is next door to a section of Macau’s light rail system that is currently under construction: “We expect mass table win per day to fall below competitors in 2017 given; 1) a disadvantaged location in the near- to medium-term as surrounding infrastructure grows, 2) more limited, relative to peers, mass gaming market experience, and 3) a slower than expected ramp to fair share, based on prior mass table ramps in the market.”

Macau’s casino gross gaming revenue for the third quarter grew by 6.6 percent quarter-on-quarter, to MOP55.0 billion (US$6.9 billion). The Credit Suisse note said it expects Macau’s market-wide casino industry EBITDA “to also grow by 7 percent” for the three months to September 30.

The Credit Suisse analysts noted: “We expect Sands China [Ltd] to see strongest 14 percent quarter-on-quarter [EBITDA] improvement on: (1) cost transfer of approximately US$35 million… from existing operations to pre-opening expenses below EBITDA line; and (2) solid performance of new Parisian [Macao] casino opened on 13 September.”

Credit Suisse added MGM China Holdings Ltd, operator of the MGM Macau on Macau peninsula – but currently constructing another property on Cotai – should also show “solid quarter-on-quarter growth of 9 percent on solid mass performance”.

A recent note from Moody’s Investors Service Inc said the successful ramp-up of operations at Wynn Palace was an important element in the maintenance of the current credit rating for U.S.-based Wynn Resorts Ltd, parent of Wynn Macau Ltd.