Casino operator Wynn Resorts Ltd reported a 25.1 percent decline in net revenues from global operations in the fourth quarter of 2014, to approximately US$1.14 billion, from nearly US$1.52 billion in the year-prior period.
The firm said the drop was the result of a 32-percent slip in net revenue from Macau operations, and a 5.8 percent fall in net revenues from Las Vegas operations.
The Macau fourth quarter performance was in part due to an 11 percent fall in the average number of VIP gaming tables deployed in the period – due to an ongoing renovation of Wynn Macau casino hotel – and the lowest hold percentage for mass market table games since the third quarter of 2013, said the parent.
In its earnings statement, Wynn Resorts additionally said it expected to open its new US$4-billion Macau casino project Wynn Palace “in the first half of 2016”. In its third quarter earnings conference call in October, the firm’s chairman Steve Wynn had said the firm was pushing to have Wynn Palace ready in time for Chinese New Year 2016.
“We continue to forecast a second quarter 2016 opening as we had factored in some government pacing of the Cotai projects,” said a note from investment analysts Anthony Wong and Angus Chan of UBS Securities Asia Ltd, referring to Wynn Palace.
“Management said they need 7,000 workers at peak and currently are 1,600 short – the government has been pacing approvals of construction labour, e.g. with a recent granting of 1,000 labour a few months later than the company had hoped,” added the analysts.
But UBS added it sees the renovation of the existing property Wynn Macau (pictured), in the city’s traditional casino area downtown, as a positive for future earnings as it will add space for Suncity Group, said to be Macau’s largest junket aggregator for high roller players based on VIP roll, and also for Neptune – via a successor business called Guangdong Group – thought to be the number two junket operator.
“Wynn’s west side casino renovation will be completed soon, adding circa 40 incremental VIP tables. Management commented that Suncity and Neptune will be taking up the new space, which is encouraging as the largest junket (Suncity) in Macau will now have its own room (versus joint venture…now),” stated UBS.
Karen Tang of Deutsche Bank AG, said in a note: “Wynn [Macau] looks set to regain some share in the first quarter: next week, it will re-open two renovated junket rooms with 40 tables for Macau’s two biggest junkets (Suncity and Guangdong/Neptune). It will also add back some mass tables to bring total table numbers back to 485 (4Q: 446).”
Group wide, Wynn Resorts said adjusted property EBITDA (earnings before interest, taxation, depreciation and amortisation) was US$352.5 million for the fourth quarter of 2014, a 29.3 percent decrease from US$498.4 million in the fourth quarter of 2013.
For the full year 2014, the group’s global net revenues were US$5.43 billion, down 3.3 percent from US$5.62 billion in 2013. Adjusted property EBITDA declined 2.1 percent to US$1.77 billion in 2014, with what the parent described as “record annual performance at Wynn Las Vegas” offset by lower adjusted property EBITDA at Wynn Macau.
For 2014, adjusted property EBITDA increased 5.9 percent to US$515.2 million at Wynn Las Vegas and fell 5.0 percent to US$1.26 billion at Wynn Macau.
In the fourth quarter of 2014, net revenues from Macau operations were US$761.2 million, a 32.0 percent decrease from the US$1.12 billion generated in the fourth quarter of 2013. Adjusted Macau property EBITDA in the fourth quarter of 2014 was US$241.2 million, down 35.5 percent from US$374.2 million in the fourth quarter of 2013.
Wynn Macau table games turnover in the VIP segment was US$20.7 billion for the fourth quarter of 2014, a 39.9 percent decrease from US$34.4 billion in the fourth quarter of 2013.
“The average number of VIP tables decreased to 244 units in the fourth quarter of 2014 from 273 units in the prior year’s fourth quarter due in large part to a renovation on a portion of the casino floor. Completion of this renovation is expected before Chinese New Year,” stated Wynn Resorts, referring to its Wynn Macau operation.
“The win percentage in the fourth quarter of 2014 was the lowest hold rate since the third quarter of 2013,” added the parent, referring to its Macau mass table games operations.
“Management said high-end premium mass was weak, similar to VIP’s. But core premium mass was solid as management deployed the hotel rooms given back from junkets to a targeted group of 7,000 players in this category,” said Ms Tang of Deutsche Bank in her note on Wynn Macau.
Wynn Macau’s slot machine handle for the fourth quarter of 2014 declined 19.5 percent from the 2013 period to US$1.1 billion, and slot win decreased by 20.9 percent. Win per unit per day was 3.8 percent higher at US$912, compared to US$879 in the fourth quarter of 2013, due to a reduction in the number of units on the casino floor.
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"If the [Macau casino] concessions are put up for bid, there will also be a lot of giant Chinese companies, some having nothing to do with gaming, which would like to take over these enormously successful casinos”
Professor emeritus at Whittier Law School in California, in the United States, and a visiting professor at University of Macau