Wynn Plans New Investment in Macau as Earnings Top Estimates

(Bloomberg) -- Wynn Resorts Ltd. plans to expand its newest property on Macau’s Cotai Strip after the project helped the company report better-than-expected earnings last quarter.

The next phase of the $4.2 billion Wynn Palace, which opened in August 2016, will be developed on 11 acres (4.45 hectares), Chairman Steve Wynn said on a conference call. He didn’t provide details of the plans.

“The depth and the foundational strength of that market is real,” Wynn said Monday. “We have been encouraged by the government in conversations with them to file our plans for Phase 2, which we’re working on now.”

Wynn Macau Ltd., the company’s Chinese subsidiary, reported stronger-than-expected results for the fourth quarter. Property earnings before interest, taxes, depreciation and amortization totaled $376 million, up 66 percent from a year earlier and beating the median analysts’ estimate of $360 million.

“We’ve always been bullish about Macau,” the casino magnate said. “There is a lot of anecdotal happiness about Chinese New Year around the corner. There is a lot of money coming in.”

Shares of parent Wynn Resorts rose 8.7 percent to $195.23 Monday in New York after the company reported sales and profit that topped analysts’ estimates. Surging revenue from the Wynn Palace overshadowed lower results in Las Vegas. The fabled Nevada casino town is still recuperating after a deadly shooting rampage in October killed 58 people.

“Palace gained market share in both VIP and mass business, which should continue as Macau upcycle continues,” Morgan Stanley analysts led by Praveen K. Choudhary said in a note on Tuesday. Phase 2 of Wynn’s new property “should continue to drive future growth.” The company’s market share in Macau expanded to 17.2 percent, ahead of Morgan Stanley’s forecast of 16.4 percent, according to the note.

JPMorgan raised Wynn Macau’s target price to HK$31 from HK$27, and raised this year’s earnings estimate by 7 percent to reflect the stronger performance of Wynn Palace, analyst DS Kim said in a note Tuesday. Gaming revenue at the Wynn Palace grew 25 percent from the third quarter, compared with 20 percent jump for the company as a whole, Kim wrote. 

On the conference call, Wynn also expressed his optimism on the business after the gaming licenses of Macau’s six operators start to expire from 2020.

“We enjoy a good deal of confidence and we have been given reason to have confidence that our businesses will continue after the initial concession expiration date,” he said, “That confidence is based upon the kinds of conversations we have with the government.”

Wynn Resorts’ earnings, excluding some items, almost tripled in the fourth quarter to $144.3 million, or $1.40 a share, the company said Monday in a statement. Analysts had forecast earnings of $1.39 a share. Revenue grew 30 percent to $1.69 billion, beating estimates of $1.56 billion.

The company said it also benefited from the tax cuts that were enacted in the fourth quarter. The results reflect an estimated net tax benefit of about $340 million, it said.

To contact the reporters on this story: Daniela Wei in Hong Kong at jwei74@bloomberg.net, Jessica Brice in Sao Paulo at jbrice1@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Crayton Harrison at tharrison5@bloomberg.net, Rob Golum

©2018 Bloomberg L.P.