GGRAsia – Wynn to spend up to US$220mln in 2023 capex in Macau

Wynn to spend up to US$220mln in 2023 capex in Macau

Feb 09, 2023 Newsdesk Latest News, Macau, Top of the deck

Casino operator Wynn Resorts Ltd plans to spend between US$50 million and US$220 million in capital expenditure (capex) in Macau during the current year. The investment is part of the minimum MOP17.7-billion (US$2.21-billion) spending that the group has pledged to pour into Macau over the next 10 years, as a condition of getting a fresh gaming concession.

The new concession period began on January 1 and runs to the end of 2032.

The information regarding capital expenditure for 2023 was shared by Julie Cameron-Doe, the firm’s chief financial officer, in comments made during a conference call with investment analysts following Wynn Resorts’ fourth-quarter results announcement.

United States-based Wynn Resorts is the parent of Wynn Macau Ltd. Wynn Macau Ltd runs the Wynn Macau gaming resort on the city’s peninsula, and Wynn Palace (pictured), in the Cotai district.

“We are currently advancing through the design and planning stages” for the planned capital investments, said Ms Cameron-Doe.

She added: “But these projects require a number of government approvals, creating a wide range of potential capex in the very near term. As such, for 2023, we expect capex related to our concession commitments to range between US$50 million and US$220 million.”

Non-gaming projects for Macau mentioned by the Wynn Resorts’ CFO include a new theatre with a resident show, a food hall, and a centre for events and entertainment shows.

The six Macau operators have pledged to the Macau government to spend in aggregate a minimum of MOP108.7 billion on non-gaming and exploring overseas-customer markets during the fresh concessions.

Collectively they will have to increase their pledged concession-related investment for the next decade by as much as 20 percent if citywide annual gross gaming revenue (GGR) reaches MOP180 billion.

‘Meaningful return’ of business

During the conference call, Wynn Resorts’ chief executive, Craig Billings, said the group had experienced “a meaningful return” of visitor volumes and demand during the recent Chinese New Year holiday period, following the relaxation of travel restrictions related to the Covid-19 pandemic. Mainland China, Hong Kong and Macau scrapped respective anti-Covid policies at the start of last month, which has spurred a boom in tourism numbers to Macau.

“Overall, during the Chinese New Year period, we delivered our strongest EBITDA [earnings before interest, taxation, depreciation and amortisation] performance since the onset of the pandemic: approximately US$4 million of normalised EBITDA per day,” Mr Billings said.

He added: “In the casino, mass table drop reached 95 percent of 2019 Chinese New Year levels, with strong play across the spectrum, from premium mass to core mass. In direct VIP, turnover was 40 percent above pre-Covid Chinese New Year levels.”

The executive stated that the positive business performance during the holiday period had extended to non-gaming activities, including tenant retail sales and hotel sales.

Macau’s January casino GGR grew by 232.6 percent month-on-month to MOP11.58 billion, according to the city’s regulator, the Gaming Inspection and Coordination Bureau. The month included mainland China’s seven-day holiday to mark the Chinese New Year festivities, from January 21 to 27.

The January GGR result was the best monthly performance for the Macau casino market since January 2020 – prior to the onset of the pandemic alert – and up 82.5 percent judged year-on-year, relative to January 2022’s MOP6.34 billion.

Wynn Resorts’ management noted during the conference call that business in Macau had remained “very, very strong” in the period after the Chinese New Year break.

Questioned about the role of junket operators in the current market, Mr Billings admitted that “the situation has changed a lot” compared to the pre-Covid period. He admitted there had been “some junket activity” over the course of the Chinese New Year holidays, but the executive said it was “too early to call out what role gaming promoters and junkets will play in the market”.

The Wynn Resorts’ CEO however acknowledged that the firm was seeing “former junket customers migrating into both premium mass and into direct [VIP]”, i.e., VIP operations directly operated by the firm.

Prior to the pandemic, junket-generated VIP business accounted for around 80 percent of Wynn Macau Ltd’s overall VIP business, Mr Billings confirmed.

The junket sector in Macau has seen a major decline in business, coinciding with the high-profile detention – in November 2021 and January last year respectively – of two of the biggest junket bosses: Alvin Chau Cheok Wa, of the Suncity Group brand, and Levo Chan Weng Lin, of the Tak Chun brand, on separate allegations of running illegal gambling operations.

The VIP sector has also been impacted by regulatory changes introduced over the course of last year: Macau’s Legislative Assembly approved in December last year a consolidating bill that regulates the licensing and activities of casino junket operators.

Fourth quarter results

Wynn Macau Ltd saw its quarterly net loss reach US$235.8 million in the three months to December 31. That was slightly better than the US$242.0-million loss in the previous quarter, but wider than the US$208.1-million loss in the fourth quarter of 2021.

The latest quarterly net loss was on operating revenues that fell by 41.6 percent year-on-year, to US$190.3 million. Wynn Macau Ltd had posted operating revenue of US$115.6 million in the third quarter of 2022.

Wynn Macau Ltd’s fourth-quarter adjusted property earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (EBITDAR) were negative to the tune of US$59.1 million, compared to a negative figure of US$25.9 million a year earlier.

The information was disclosed by Wynn Macau Ltd in a filing to the Hong Kong Stock Exchange on Thursday morning. Its parent Wynn Resorts had issued its own set of fourth-quarter results overnight.

Casinos in Macau continued to operate in the fourth quarter in a low-revenue environment amid Covid-19 alerts and outbreaks either in Macau or mainland China.

Parent Wynn Resorts reported operating revenues of US$1.00 billion for the fourth quarter of 2022, a decrease of US$48.2 million in year-on-year terms. Its net income stood at US$32.4 million for the period, compared to a net loss of US$177.2 million a year earlier. For full-year 2022, Wynn Resorts reported a net loss of US$423.9 million, an improvement on the US$755.8-million loss in the prior year, on operating revenues that were flat in year-on-year terms, at US$3.76 billion.

Hong Kong-listed Wynn Macau Ltd reports under International Financial Reporting Standards. Its parent Wynn Resorts reports under Generally-Accepted Accounting Principles.

Regarding Wynn Resorts’ plan to develop a casino resort in the United Arab Emirates, in the Middle East, Mr Billings said during the conference call with analysts that the firm was “in the late stages of programming” for the complex. “I expect we will be driving piles for the foundation of the property by the middle of the year.”

The scheme, to be located in Ras Al Khaimah, was first announced in January last year.