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Wynn Resorts' profit falls short despite rebound in Macau
[LOS ANGELES] Wynn Resorts Ltd's new Macau resort came up short last quarter, failing to fully capitalize on the recovery in the world's biggest casino market as construction nearby kept some guests away.
The US$4.2 billion Wynn Palace, opened last August, helped Las Vegas-based Wynn Resorts deliver second-quarter sales that topped analysts' estimates, according to a statement Tuesday. But earnings fell short, sending the stock lower in extended trading.
A strong recovery is under way in Macau, where industry revenue rose 22 per cent in the second quarter. After three years of decline, the market began growing last year, in part thanks to new resorts. The outlook has been clouded by Chinese government efforts to prevent money laundering. The steps include facial recognition technology installed at automated teller machines.
Wynn Resorts, led by billionaire Steve Wynn, said profit excluding some items rose to US$1.18 a share, missing the US$1.19-a-share average of analysts estimates. Revenue soared to US$1.53 billion, beating projections of US$1.45 billion.
The new Wynn Palace generated property earnings of US$87.4 million. That was below the average estimate of US$115.5 million from Consensus Metrix. On a conference call with investors, Wynn executives said that business continues to be hurt by construction on all sides of the resort that may not end until next year. That's cut walk-in traffic.
"We've dealt with a severe handicap," Wynn, the company's chief executive officer, said on the call.
The company is in the midst of construction boom, building a new casino in Boston and a lake-themed resort behind its flagship property in Las Vegas.
The company's Macau unit Wynn Macau Ltd reported US$298 million in property earnings, growing about 56 per cent from last year, above the consensus, as the beat in its Peninsula project offset the shortfall at the Palace. While the operator's Peninsula property Wynn Macau rebounded as business from high rollers was a bright spot, the Palace was below expectations due to disappointing mass market revenue growth, JPMorgan Chase & Co analyst DS Kim said in a note Wednesday. "While management's tone remained upbeat as ever, we think the initial stock reaction may be negative given the significance of Palace to the future profits and cash flow," Mr Kim in a Wednesday note on Wynn Macau. Shares of Wynn Resorts, which generated 64 per cent of its revenue in Macau last year, fell as much as 4.3 per cent to US$133 in extended trading after the results were announced. The shares were little changed at US$138.98 at the close in New York.
Wynn Macau dropped almost 3 per cent Wednesday after the market opened in Hong Kong, while Bloomberg Intelligence's Macau stock index fell 0.4 per cent.