WYNN Q3 CONF CALL: A DELICIOUS MEAL

In between bites, Steve Wynn held an upbeat call except when talking about the US government.  Here is the transcript – minus the munching sounds.

HIGHLIGHTS FROM THE RELEASE

• "Wynn Resorts also announced today that its Board of Directors has approved a cash dividend of $8 per share on its outstanding common stock...payable on December 7, 2010, to stockholders of record on November 23, 2010. The stock will begin to trade ex-dividend on November 19, 2010."
• "On November 2 , the Wynn Macau, Limited Board of Directors approved a HK$0.76 per share dividend...payable on December 3, 2010, to stockholders of record on November 22, 2010. In addition, the Board of Wynn Macau, Limited determined the Company will consider paying recurring dividends, with a target yield of 1-3% annually, after a review of the then current financial results during each year and having regard to the terms of the financing documents that Wynn Macau, Limited is party to. The Board of Directors has determined that a target yield of 1-3% annually, will allow Wynn Macau, Limited to maintain ample liquidity to achieve its Cotai growth strategy."
• Wynn Macau reported net revenues of $671.4MM and EBITDA of $198MM (below whisper expectations that we believe were a little north of $205-215MM range)
  • Hold was normal at 2.88%
    
• Wynn Las Vegas reported net revenue of $344.5MM and EBITDA of $76.5MM
• Cash: $1.9BN; Debt: $3.2BN with $2.6MM at Wynn Las Vegas and $552MM at Wynn Macau.  Post dividend cash will be $1BN and total debt will equal $3.4BN.
• Capex was $40MM, almost entirely related to Wynn Las Vegas' room remodel

CONF CALL NOTES

• "I believe that we've seen the bottom in Las Vegas" and had a nice October as well
• EBITDA shouldn't be the most important metric - rather cash flow since interest and maintenance expenditures are real expenses
• $150-160MM in LV at the nightclubs with 40% margins
• Remodeled Wynn LV rooms are getting ADR premiums
• They have been the victims of 8% annual increases in healthcare costs. As a result of the HC bill, it will now increase to 11-12%/ year.
• Cotai - finally have a plan and a building drawn.  They have begun soil testing and will start site clearing soon.  Will show pictures and models in a few weeks.

Q&A

• Some of the other fellows are desperate to increase their business in preparation for their IPO.  They made over $90MM in Oct in Macau. Would prefer that their competition adhere to the rules but they will leave that to the government.
• Won't publish the building cost until their next conference cost - but it will be around $2.5BN. Will be open for business by 2015.
• Japan strategy and update?
  • A cross party committee has been formed to study the matter and report back to the Diet
  • Exploratory committees are visiting Las Vegas and Macau
  • What happens is murky at best. They need to accept a budget which in itself can cause a crisis and a new election which can change the government.  Over the past 6 years, the average life span of a prime minister in Japan is 1 year.
• Cotai land concession?
  • You lease the land from the government for a ground rent based on the property description.  The government commits in advance of the land grant.  The final land grant and lease payment is determined by what is being built and the license gets published in the gazette.
  • Final lease execution will occur in a few weeks
  • Will probably do an add-on to their credit facility and use the FCF to fund the majority of it
• Additional commentary on Vegas bottom?
  • Convention and group is starting to improve and sees more stability
  • Have 65% of their convention room nights on the books for next year. Should return to 18-19% of their room nights and there is some rate improvement there.
• They like it when their earnings are 50% of their debt
• They would look at other markets in the interim of Cotai opening but don't want to talk about it now.
• Trends in Macau - seeing more customers and longer stays
• Hold percentage in Las Vegas has started to come back - as they get the better customers and better players back in 
• Will they be adding more junket partners and thoughts on extending credit
  • They do have plans to add more junkets - 2-3 more junkets over the next year and one of which will be added before year end
  • Will not use credit to buy business
• I don't know why they are so defensive about losing some market share... I mean their numbers are still good but clearly they did lose business
• Do they think that Cotai will cannibalize Wynn Macau? 
  • No