GGRAsia – Wynn Macau Ltd positive Oct EBITDA, VIP shrinking: Maddox

Wynn Macau Ltd positive Oct EBITDA, VIP shrinking: Maddox

Nov 06, 2020 Newsdesk Latest News, Macau, Top of the deck, World

Macau casino operator Wynn Macau Ltd reported on Friday a nearly US$280.7-million net loss in the third quarter of 2020, compared to a US$103.7-million profit in the equivalent quarter a year earlier. However, the firm achieved break-even in earnings before interest, taxation, depreciation and amortisation (EBITDA) for October, and expects the trend to continue, said chief executive Matt Maddox.

The company had posted a nearly US$351.6-million net loss in the second quarter of 2020.

The Wynn group’s Macau adjusted property EBITDA was negative for the third quarter of 2020, reaching losses of more than US$112.1 million. That compared to negative EBITDA of nearly US$193.6 million in the three months ended June 30 and positive EBITDA of just below US$301.2 million reported for the third quarter of last year.

The latest set of results of the Macau unit were published following the parent company’s – U.S.-based Wynn Resorts Ltd – third-quarter results report on Thursday.

Wynn Macau Ltd runs the Wynn Macau complex on the city’s peninsula and the Wynn Palace casino resort (pictured) in the Cotai district.

“The third quarter in Macau was very similar to the second. There wasn’t a lot to talk about,” noted Mr Maddox in a conference call with investment analysts following Wynn Resorts’ third quarter results announcement. “We were still seeing roughly 8 percent to 10 percent of our visitor volumes compared to pre-Covid-19 levels.”

He added: “In October, we started to see those trends changing. We went from 10 percent of our normal visitor volumes up to almost 30 percent – and it wasn’t just over Golden Week; it was throughout the month.”

The executive stated that Wynn Macau Ltd’s table mass drop “was roughly 40 percent of our pre-Covid-19 levels” in October, with turnover from junket operations at “between 25 percent and 30 percent” of pre-Covid-19 levels.

Junkets ‘not dead’

Mr Maddox stressed that the junket segment in the Macau market was “not dead”, despite facing challenges. However, he admitted the segment would lose overall weight, even in a post-pandemic scenario.

“I don’t anticipate that junket business will be back to 2019 levels because it is consolidating and it is shrinking,” he said.

Mr Maddox stated that the “overall mood, attitude and trajectory” of global market trends in Macau remained “quite good.” He also mentioned good performance in retail sales in October for Wynn Macau Ltd, with sales in some stores up 25 percent year-on-year.

Mr Maddox said in commentary included in Wynn Resorts’ third-quarter results announcement that travel restrictions to Macau related to Covid-19 had begun to “gradually and thoughtfully ease”. He said management was “confident” the city’s gaming market “to benefit from the return of consumer demand as we head into 2021.”

But Wynn Resorts noted in its results announcement: “Certain Covid-19 specific protective measures – such as traveller quarantines and requirements for negative Covid-19 tests before entering Macau, limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, Covid-19 negative test results requirements for entry to gaming areas, and health declarations – remain in effect at the present time.

“We are currently unable to determine when these measures will be lifted,” the firm added.

Andrew Lee of Jefferies Hong Kong Ltd said in a Thursday memo that Wynn Macau Ltd’s third quarter “adjusted EBITDA loss was larger than consensus”.

He added that while Wynn Macau Ltd – and several other casino operators in Macau – had reported having achieved EBITDA break-even in October, the sector was “likely to only gradually and slowly rebound until electronic IVS [Individual Visit Scheme] tourist visas are turned on” in Mainland China.

IVS exit visas permit mainland residents to visit Macau. Mainland residents account in normal trading conditions for a majority of tourists to Macau. A number of investment analysts has suggested the return of electronic processing for IVS visas would be a catalyst for visitor numbers to Macau, and in likelihood for the city’s casino gross gaming revenue.

In-person application for IVS permits is reportedly being required since resumption on September 23 of IVS for all mainland residents. A number of analysts has said that this might so far have moderated the volume of such tourists to Macau, as the market looks for recovery from the effects of the Covid-19 pandemic.

Macau casino results

Wynn Macau Ltd said its operating casino revenues for the three months ended September 30 were US$39.5 million. That compared with a negative result of almost US$15.0 million in the previous quarter. The firm had reported close to US$906.5 million in positive operating casino revenues in the third quarter of 2019.

As of October 31, Wynn Macau Ltd had approximately US$2.2 billion of available liquidity, according to management

The group as a whole – which also runs Wynn Las Vegas in Nevada and Encore Boston Harbor in Massachusetts in the U.S. – swung to a quarterly net loss of US$831.5 million, compared to net income of just under US$26.9 million a year earlier. Wynn Resorts reported a group-wide adjusted EBITDA loss of US$65.9 million, compared with positive EBITDA of US$ 396.96 million in the prior-year period.

Wynn Resorts said in May that it had suspended its quarterly dividend programme “due to the financial impact of the coronavirus pandemic”.

Wynn Resorts also announced on Thursday the establishment in October of Wynn Interactive Ltd, a company focused on “digital and interactive sports betting and gaming throughout the United States.” The firm was formed through the merger of Wynn Resorts’ existing U.S. online sports betting and gaming operations with those of new strategic partner BetBull Ltd. Following the merger, Wynn Resorts owns approximately 71 percent of Wynn Interactive and will consolidate Wynn Interactive going forward, the firm said.