Gambling News | 05 Nov 2024

Despite falling short of expectations, Wynn CEO remains "bullish"; debt decreases while Al Marjan project increases

 Construction on Wynn Resorts' project in the United Arab Emirates (UAE) is proceeding as planned, and the company has authorised stock buybacks totalling $1 billion (£770.2 million/€918 million).
 Island at Wynn Al Marjan
 Chief Executive Officer Craig Billings began the third-quarter earnings call by discussing the repurchase, stating that it demonstrates Wynn's continued "enthusiasm" for its financial situation.  That the buyback program exemplifies the firm's "continued commitment to prudently return capital to shareholders" was his next point.

 The Al Marjan hotel tower's 24th level has been finished, according to Billings, winners of the first UAE casino licence.  He estimates that the nation's gaming industry will be worth between $3 billion and $5 billion.  And leading the charge will be Wynn, which is the sole casino company to have received a licence thus far.  According to Billings, the amount of concrete and steel that has been installed thus far is 3.6 million square feet.

 "Absolutely the most fascinating emerging market for our sector in decades," remarked Billings of the United Arab Emirates.  When it comes to our company's future, I am still very optimistic.  Our crew is the most devoted in the industry, and we have the finest assets in the most prestigious gaming markets on the planet.

 "We are investing in a development that is well under way and promises a high return on investment (ROI), setting us apart from our competitors in the long run."

 Wynn invested $18.2 million in the Marjan Island project during the third quarter.  With this increase, its total equity contribution is now $532.6 million.

 A critical motivator, "luxury positioning"
 Wall Street had anticipated a net loss of $32.1 million on revenue of $1.69 billion for the third quarter, but the company actually lost more than that.  According to Billings, the gaming industry in Las Vegas is in a slump, and Deutsche Bank found that Macau's revenue was $27 million lower than expected.  In trading after the market closed, Wynn stock fell 2.8%.

 Even though US properties saw the lowest amount of year-over-year improvement, Billings pointed to significant third-quarter growth globally.  Despite his assertion that "demand remained strong" in Nevada, the state's revenue increased by approximately 1% and EBITDA stayed unchanged "year over year on very tough comps."

 There was a 5% increase in lodging income and a 4% increase in slot handle for the corporation.  Billings highlighted Wynn's clientele as an asset, even though the US economy as a whole could face challenges.

 "The market's most affluent and therefore most resilient customers continue to appeal to our luxury positioning and unique programming," he stated.

 For Wynn's Boston Encore site, the figures remained largely unchanged, with EBITDAR increasing 4% to $63 million compared to the third quarter of 2023.  While gaming revenue increased by 2% and non-gaming revenue by 1%, slot handle increased by 3%.

 Although Wynn is primarily concerned with the United Arab Emirates, it is also expanding and diversifying its company in Macau.

 Wynn targets non-gaming sectors in Macau for growth
 In terms of financial metrics, that market dominated the third quarter, with a 3% increase in EBITDA, a 6% increase in revenue, and a 10% increase in combined mass table and slot win.  Revenue from the Special Administrative Region was $20 million lower than Wall Street expected, due to a 1% decline in operating revenue from Wynn Palace to $519.8 million and a 19.3% increase from Wynn Macau to $352 million.

 Hotel and retail were the main drags on non-casino income, which fell 8% year-over-year, as pointed out by Carlo Santarelli of Deutsche Bank.

 Overarchingly, Wynn is diversifying its Macau offers beyond gambling.  In addition to "revitalising and expanding the Chairman's Club, our most exclusive gaming area at Wynn Macau," Billings announced that four of the property's dining outlets have been refurbished.

 Santarelli predicted that Wynn Macau's market share would rise in 2025, when these additional amenities debut, despite the intense competition in Macau.

 "Given slow non-gaming trends and annual cost increases, our Macau revisions are somewhat material," he wrote in an analyst note. However, he also noted that they believed the Macau environment to remain mostly unchanged, suggesting that they could be conservative.

 Reduced debt equals savings of $70 million
 The benefits of Golden Week, which occurred from October 1st to the 7th, were also mentioned by Billings.  The mass table drop in 2023 was 30% higher than Golden Week.  A production show and event centre are other ongoing projects for the business.

 Wynn has cut its debt by a large amount, which means that the company will save $70 million a year in interest payments, according to CFO Julie Cameron-Doe.

 As of 30 September, the firm's cash and revolver availability was $3.5 billion.  Out of that, $1.7 billion is accessible in US dollars and $1.8 billion is available in Macau dollars.  At the beginning of October, the business cut its gross debt by $1.2 billion.  For stockholders as of November 15th, the board has authorised a $0.25 cash dividend.

 As the firm is investing in improvements across all of its properties, Billings and Cameron-Doe both reaffirmed a favourable view for 2025.