Macau casino operator Wynn Macau Ltd reported on Wednesday a nearly US$351.6-million net loss in the second quarter of 2020, compared to a US$168.6-million profit in the equivalent quarter a year earlier. The results of the Macau unit were published following the parent company’s – U.S.-based Wynn Resorts Ltd – second-quarter results report on Tuesday.
Wynn Macau Ltd said its operating casino revenues for the three months ended June 30 were negative by almost US$15.0 million, impacted by negative VIP hold. That compared with more than US$1.0 billion in positive operating casino revenues in the second quarter of 2019.
The results in Macau came amid widespread disruption to casino operations around the world due to the Covid-19 pandemic, and associated travel restrictions.
The Wynn group’s Macau adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) turned negative for the second quarter of 2020, reaching losses of nearly US$193.6 million. That compared to positive EBITDA of just above US$343.0 million reported a year earlier.
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 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$637.6 million, compared to net income of just under US$94.6 million a year earlier. Wynn Resorts reported a group-wide adjusted EBITDA loss of US$322.9 million, compared with positive EBITDA of US$480.6 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”.
Second-quarter operating revenues from Wynn Palace in Macau were US$8.7 million for the second quarter of 2020, a 98.6 percent decrease from the US$628.9 million recorded a year earlier. Wynn Palace recorded an adjusted property EBITDA loss of US$110.9 million for the three months to June 30, compared to EBITDA of US$167.2 million in second-quarter 2019.
Operating revenues from the Wynn Macau property were approximately US$11.9 million for the three months ended June 30, a 97.8 percent decrease from the nearly US$546.5 million recorded in the prior-year quarter.
The Wynn Macau venue reported an adjusted property EBITDA loss of US$82.6 million for the second quarter of 2020, from EBITDA of US$175.9 million a year earlier.
IVS key for rebound
The Wynn Resorts group mentioned in commentary included in its second-quarter results announcement that, “in Macau, the authorities have begun to gradually and thoughtfully ease some visitation restrictions” related to Covid-19. The group said its management was “confident” the city’s gaming market “will benefit from the return of the Chinese consumer as we move through the back half of 2020.”
But the firm noted: “Certain public health safeguards, such as traveller quarantines, limiting the number of seats per table game, slot machine spacing, [customer] temperature checks, mask protection [for staff and customers], Covid-19 negative test results requirements for entry to gaming areas, and health declarations remain in effect at the present time.”
The group added: “We are currently unable to determine when these measures will be lifted.”
Andrew Lee of Jefferies Hong Kong Ltd said in a Wednesday memo that, “with liquidity equivalent to 40 months of zero revenue, the focus [for Wynn Macau Ltd] remains squarely on further [border] re-opening.”
He added: “The key remains China issuing Macau tourist visas, but timing and pace remain unknown. This is the key sector driver and share prices will bounce on IVS [Individual Visit Scheme] being reissued, not earnings or valuation.”
Exit visas for package tour trips, or for independent travel under China’s IVS system are still not being issued for now. A number of investment analysts and industry insiders has said they expect a return of the IVS system to be a key element in any rebound of Macau gross gaming revenue.
Sanford C. Bernstein Ltd said in a Wednesday note, following Wynn Resorts’ results announcement: “The current sentiment among operators is that they will all be rational once the IVS visa comes back in terms of promotions and marketing spend.”
Analysts Vitaly Umansky, Kelsey Zhu and Tianjiao Yu added: “A such, there is no expectation of a price war that would impact profitability.”
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Vitaly Umansky, Kelsey Zhu and Tianjiao Yu
Analysts at brokerage Sanford C. Bernstein