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Macau Growth Impresses, Lifting Wynn Estimates

Wynn Resorts ( WYNN ) reported better than expected Q1 earnings a few weeks back driven by strong earnings from Macau operations, which we look at below. Revenue in Q1 increased by near 47% at Wynn Macau and by 24% in the Las Vegas operations. We also note that Las Vegas results came in firm which bodes well for Wynn as well as Las Vegas Sands (NYSE:LVS) and MGM Resorts International ( MGM ). We have updated our price estimate for Wynn Resorts stock from $118 to $135 , primarily due to an above average growth outlook for the Macau region and the recovery in the Las Vegas casino industry. Our price estimate is about 7% shy of the market price.

Macau Operations

Wynn Macau net revenues increased from $591 million in the first quarter of 2010 to almost $866 million in Q1 2011. Table games turnover in the VIP segment was $29.3 billion for the first quarter of 2011, representing a 44.7% increase from $20.2 billion in the first quarter of 2010. The company has a strong foothold in Macau. At present, it has 10% of the table games in the region which contribute a 14% market share in table games. Similarly, it has 8% of the slots which capture a 22% market share.

The opening of a new resort in the Cotai region would further strengthen Wynn's presence in Macau. The resort that Wynn plans to build will run an estimated cost of $2-$3 billion. We expect VIP tables games turnover to witness an above average increase for the full year 2011 due to the opening of Encore in April 2010.

In 2015, we expect VIP tables games turnover to increase considerably due to the addition of 500 tables assuming Wynn's Cotai resort would start operations by 2015.

Las Vegas Operations Chip In

In recent past, there have been uncertainties associated with the pace of recovery in the Las Vegas casino industry. There were some unanswered questions as to whether the Las Vegas casino industry would bounce back to its pre-recession growth levels, and if so, at what pace. The exceptional growth of the Macau casino industry in the last couple of years added further doubts on the recovery and the fate of the Las Vegas casino industry.

However, Wynn's Q1 numbers tell a different story. The numbers show a recovering outlook for the Las Vegas casino industry. Net revenues for Wynn's Las Vegas operations posted an impressive growth of 24% to reach near $395 million vis-a-vis Q1 2010. The contribution of casino revenues were higher than that of non-casino revenues. Casino revenues increased by 39% from the first quarter of 2010 whereas non casino revenues showed an increase of 10.8%.

See our full analysis for Wynn Resorts

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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