Wynn Macau posts strong 3Q on Palace strength
Macau casino operator Wynn Macau Ltd reported total revenues of approximately US$1.15 billion in the third quarter of 2017, up 68.8 percent compared with nearly US$682.7 million in the prior-year quarter. Casino revenue rose by 70.5 percent year-on-year, to about US$1.08 billion, on the strength of Wynn Palace (pictured), located in Macau’s Cotai district.
The unaudited results of the Macau unit were filed on Friday with the Hong Kong Stock Exchange, and prepared in accordance with International Financial Reporting Standards.
Wynn Macau Ltd recorded net profit of nearly US$90 million in the three months to September 30, compared to a net loss of US$8.6 million a year earlier. In the prior-year period, the casino operator had swung to a loss, in part tied to the opening of Wynn Palace on August 22. The year-ago results included only 40 days of operations of Wynn Palace.
The results of the Macau unit helped Las Vegas-based Wynn Resorts Ltd deliver strong third-quarter results. The global operations of Wynn Resorts – including Las Vegas, in the United States, and Macau – generated net revenues of US$1.61 billion for the July to September period, up 45.3 percent compared to US$1.11 billion in the same period of 2016.
“The increase was the result of an increase of US$390.7 million from Wynn Palace, which opened in the third quarter of 2016, and increases of US$79.3 million and US$32.5 million from Wynn Macau and our Las Vegas operations,” the parent company said.
Net income for the parent company – on a U.S. generally accepted accounting principles (GAAP) basis – was US$79.8 million, or US$0.78 per diluted share, for the three months to September 30, compared to a net loss of US$17.4 million, or US$0.17 per diluted share, in the prior-year period.
Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for the group were US$473.0 million for the third quarter of 2017, up 54.8 percent from a year earlier.
The parent company additionally said it recorded an increase in property charges during the reporting period, including US$19.1 million of estimated costs related to property damage caused by Typhoon Hato, which struck Macau on August 23 and brought with it winds of more than 200 kilometres per hour (124 mph).
Macau operations
Adjusted Property EBITDA from Wynn Macau Ltd was US$183.2 million for the third quarter of 2017, a 21.3-percent increase from US$151.0 million for the same period of 2016.
“We are very happy with the progress of Macau … When we started, we had 9 percent of the [Macau] market with one hotel … and now we have 16 percent of the market,” said company chairman and chief executive Steve Wynn on Thursday during an earnings conference call with analysts, for the U.S.-based parent Wynn Resorts.
“Our ability to capture market share [in Macau] is clearly established and that – in a matter of speaking – sets us apart at least in that kind of metric,” he added.
Investment analysts said the Macau unit’s third-quarter results were in line with expectations, showing a strong performance from the Wynn Palace property offset by weaker performance at Wynn Macau on the peninsula.
The Wynn Palace property on Cotai generated net revenues and adjusted property EBITDA of US$555.3 million and US$138.2 million, respectively, for the third quarter of 2017.
Third-quarter casino revenues from Wynn Palace were US$514.5 million, compared to US$146.7 million for the same period of 2016. Table games turnover in VIP operations was US$13.69 billion, compared to US$4.15 billion for the third quarter of 2016 and up 18 percent quarter-on-quarter.
Table drop in mass-market operations was US$866.6 million, compared to US$275.9 million for the third quarter of 2016 and up 18.9 percent sequentially.
Net revenues from the Wynn Macau casino hotel property on the peninsula were US$567.7 million for the third quarter of 2017, up 16.2 percent from the prior-year period, but down 16.8 percent quarter-on-quarter. Adjusted property EBITDA from the Wynn Macau resort rose 21.3 percent year-on-year to US$183.2 million, but declined 12.9 percent sequentially.
Casino revenues from the Wynn Macau property were US$567.7 million for the third quarter of 2017, a 16.2-percent increase from a year earlier, but down 13.3 percent from the second quarter. Table games turnover in VIP operations was US$13.37 billion, up 22.2 percent from the prior-year period, but down 16.5 percent quarter-on-quarter.
Table drop in mass-market operations was US$1.07 billion for the period, a 3.2-percent decrease compared to the third quarter of 2016. Table games win in the segment increased 5.5 percent year-on-year to US$216.4 million.
Palace ramp up
Banking group Morgan Stanley said that the “stronger than expected” results at Wynn Palace – with EBITDA up 58 percent quarter-on-quarter – were offset by the Wynn Macau property performance, with EBITDA down 13 percent sequentially.
“While EBITDA of US$138 million [at Wynn Palace] came 16-percent higher than our expectation, we are concerned that faster ramp up so far could mean slower growth trajectory in 2018/19,” wrote analysts Praveen Choudhary, Alex Poon and Thomas Allen in their Thursday note.
On the conference call with analysts on Thursday, Wynn Macau Ltd president Ian Coughlan said the peninsula property maintained its market share during the third quarter.
“Wynn Macau continues to do more than its fair market share downtown, it continues to be the market leader,” said Mr Coughlan. “There has been a lot of discussion about cannibalisation at Wynn Macau [property]; there hasn’t been cannibalisation, it’s just getting compared to a very, very strong second quarter. If you look at October month-to-date, it bounced right back,” he added.
JP Morgan Securities (Asia Pacific) Ltd said it believed the strong ramp-up at Wynn Palace was supported by several factors. “The property was able to build up decent critical mass in player database, to improve host-player relationships, to fine-tune player programmes and floor layout, to start getting good repeated visits and player referrals,” said a Friday note from analysts DS Kim and Sean Zhuang.
According to Wynn Resorts’ management, the growth in revenue in the mass-market segment at Wynn Palace was driven primarily by premium and mid-tier mass players. Management also highlighted that its player reinvestment rates stayed steady with promotional allowances growing only 4 percent quarter-on-quarter (versus +15 percent in mass GGR).
Mr Coughlan additionally said on the conference call that at Wynn Palace the company is seeing the “fruits of its labour”. “We’ve done a lot of reworking of services in the mass casino. We’ve changed a lot of our player programmes, but we haven’t over-invested compared to our competitors,” he stated.
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