Wynn Macau misses profit estimates on slow start for new casino

[LOS ANGELES] The Macau unit of Wynn Resorts Ltd, the casino company founded by billionaire Steve Wynn, posted third-quarter profit that missed analysts' estimates as its new US$4.4 billion project in the former Portuguese colony failed to lift betting revenue there.

Wynn Macau Ltd posted adjusted property earnings of US$177 million before interest, taxes depreciation and amortization. That's compared with the US$182 million median estimate of seven analysts surveyed by Bloomberg.

Shares of the company dropped as much as 4.7 per cent Thursday in Hong Kong trading, the most in more than two months. The Bloomberg Intelligence index of Macau casino stocks dropped as much as 1 per cent while the Hang Seng Index dipped as much as 0.5 per cent.

Macau, the only place in China where casinos are legal, has registered three months of growth in gambling revenue after more than a two-year slump as new casino projects bring in tourists and casual gamblers with family-friendly features. Wynn, meanwhile, still appeals to high-stakes players and others at the premium-end of the mass market. Its new resort has been impeded by nearby construction.

"They're off to a slower start than expected," Trip Miller, managing partner of Memphis-based Gullane Capital Partners, said in an interview. Foot traffic at the new property may have been light due to construction around the resort. Its new resort may have also taken business from Wynn's existing Macau casino, he said.

Total revenue for the Las Vegas-based Wynn Resorts rose 11 per cent to US$1.11 billion, according to a statement Wednesday. That also missed the US$1.12 billion average of estimates compiled by Bloomberg. Wynn Resorts shares slid 1.7 per cent to US$96.52 at the close in New York.

Wynn Palace's adjusted property earnings was US$25.5 million before interest, taxes depreciation and amortization. Casino revenues for the third quarter were US$146.7 million.

Net revenue from its other property, the Wynn Macau resort, was US$518.1 million, a 12 per cent drop from the same period a year earlier. Adjusted property earnings before interest, taxes deprecation and amortization fell 7.3 percent to US$151 million.

VIP gaming revenue dropped 5.7 per cent year-on-year at the Wynn Macau for the third quarter, while mass revenue fell 13 per cent. In Las Vegas, sales rose 3.9 per cent to US$427.1 million, while adjusted Ebitda gained 10 per cent to US$128.9 million.

The "initial knee-jerk reaction will likely be negative" as cannibalization at Wynn Macau was more than expected with bigger drops in both VIP and mass gaming revenue than the industry, JPMorgan Chase & Co analyst DS Kim wrote in a note Thursday. The company management's tone on Wynn Palace has also turned "more cautious," he said.

Wynn acknowledged on a conference call that business at the new resort was developing more slowly than expected. Construction at other resorts, and work on a light rail system in Macau, impeded access to the property, he said.

The company is working with the Macau government to make improvements, such as crosswalks, to make it easier to get to. Wynn also said he was expanding a casual dining restaurant at Wynn Palace to meet higher-than-expected demand.

BLOOMBERG