Wynn Resorts (
) reported solid Q2 earnings driven by its Macau operations,
specifically the growing VIP gaming market in the region. Wynn's
primary competitors in Macau include Las Vegas Sands (
), MGM Resorts International (
), SJM (HKG:0880), Galaxy (HKG:0027) and Melco Crown.
Our $130 price estimate for Wynn Resorts
implies a 20% discount to the market price.
Macau VIP Gaming at a Glance
VIP table games are popular among more Asian gamblers
proportionally than U.S. gamblers. In Macau, VIP Baccarat brings in
close to 84% of all table games revenue. The majority of these VIP
gamblers are high net worth individuals (HNIs) from Mainland China
where strict laws prohibit gambling. Since Macau is a Special
Administrative Region (
) of China and geographically closer than Singapore, the other
major Asian gaming hub, this makes it easy for Chinese visitors to
come to Macau.
Wynn reported impressive growth in table games turnover in the
VIP segment with $32.7 billion in Q2 representing an over 50%
increase from Q2 2010. We expect VIP table games turnover to
continue to show impressive growth due to the potential size of the
Macau gaming market.
We see strong growth ahead due to the following factors:
Increasing population of wealthy Chinese:
VIP gaming currently represents two-thirds of Macau gross gaming
revenue. According to a recent Cap Gemini-Merrill Lynch
Private Wealth report, China recently surpassed the UK to become
the fourth largest population of HNIs. In the Asia-Pacific
region, Merrill Lynch expects the number of HNIs a to grow at a
12.8 percent compounded growth rate in the coming years vs. a
global rate of 8.1 percent.
Expected completion of Cotai project by 2015:
The expected completion of the Cotai project in 2015 will lead to
an increase in VIP table games turnover. Wynn's CEO Steve Wynn has
asserted that the company would focus to target the high end gaming
VIP Baccarat volumes are expected to increase
: VIP Baccarat is gaining popularity in Asia, particularly China.
In 2010, it generated revenues of $16.9 billion, accounting for 72
percent of the casino sector's overall revenue.
See our full analysis for Wynn Resorts stock