Wynn plans new investment in Macau as earnings top estimates

[HONG KONG] 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 US$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," Mr 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 US$376 million, up 66 per cent from a year earlier and beating the median analysts' estimate of US$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 per cent to UD$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 per cent, ahead of Morgan Stanley's forecast of 16.4 per cent, according to the note.

JPMorgan raised Wynn Macau's target price to HK$31 (S$5.23) from HK$27(S$4.55), and raised this year's earnings estimate by 7 per cent to reflect the stronger performance of Wynn Palace, analyst DS Kim said in a note Tuesday. Gaming revenue at the Wynn Palace grew 25 per cent from the third quarter, compared with 20 per cent jump for the company as a whole, Mr Kim wrote. On the conference call, Mr 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 US$144.3 million, or US$1.40 a share, the company said Monday in a statement. Analysts had forecast earnings of US$1.39 a share. Revenue grew 30 per cent to US$1.69 billion, beating estimates of US$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 US$340 million, it said.

BLOOMBERG