WYNN: IT WASN’T JUST HOLD

The bears will cite lucky play for the monster quarter. Adjusting our Street high estimates for normal hold still leaves a big beat.

Despite ever rising estimates, Wynn handily beat consensus and our Street high estimate.  Don’t even try to attribute the strength to favorable luck.  I’m talking to you bears and shorts (4.75% of float).  Yes, Wynn’s hold percentage was high in Macau.  However, only the high Mass hold should’ve been a surprise to anyone. The high VIP hold was well known and should’ve been in the projections.  It certainly was in our model.

So relative to our estimate, Mass hold was around 5% higher than normal.  Normalizing that would’ve decreased EBITDA by $15 million.  Wynn's Macau's EBITDA came in $34 million above our estimate in Macau - and we were handily ahead of the Street.  That amounts to a great quarter in Macau.  Overall, we were 11% ahead of the street for company-wide EBITDA.  Expectations have certainly risen – we were 20% higher when we put out our preview a month ago– but the quarter was even better than we thought.  Apparently, Hong Kong investors agree as 1128.HK was up 3% overnight vs. the average Macau gaming stock down almost 4%.

Beyond the quarter, there were a few interesting takeaways.  Wynn is obviously holding low in Q1 which isn’t a surprise given the low market share.  Volumes are strong and should get stronger as the property added yet another junket this quarter with two more coming on in Q2.  More intriguing was Wynn’s reference to development on which he wouldn’t comment specifically other than to say he would consider US development.  Corporate expense was up $6MM sequentially which wasn’t related to the design of Cotai.  Hmmm.

Details:


WYNN Macau

  • Reported revenues of $912MM beat our estimate by 3% or $27MM and EBITDA of $297MMM beat our projections by $34MM or 13%
  • Casino revenues were $21MM higher while net non-gaming revenues were $6MM better
  • VIP gross revenues were $4.5MM better but net revenues were $17MM above our estimate due to lower than estimated rebate rate of 89bps (28.4% of hold) vs. our estimate of 93 bps or 30% of hold.
    • Direct play as a % of total RC volume was 11% or $3.1BN
    • Direct play grew 54% YoY while Junket RC grew 65% YoY
    • The rebate rate of 89bps was the same as 3Q10, despite hold being 27bps higher
    • If hold was 2.85%, revenues would have been $83MM lower and EBITDA would have been $16MM lower
    • We knew that VIP hold was high and our model reflected that
  • Mass table revenues came in $2.4MM above our estimate
    • While the reported number was very close to our estimate, mass drop grew 18% less than our estimate but hold was a lot higher
    • Assuming mass hold was equal to the 7 quarters trailing average of 22.4%, revenues would have been negatively impacted by $24MM and EBITDA would have been $14MM lower
  • Slot revenues were $1MM higher than our estimate
    • Hold was 0.2% better but handle was $23MM lower
  • It appears that fixed expenses were $20MM below our estimate or $90MM, down from $102MM last quarter but up 15% YoY

WYNN Las Vegas

  • Net revenues of $325MM came in $2.4MM below our estimate while EBITDA of $68MM was $2.6MM below our estimate
  • RevPAR was $5 higher than we estimate – with occupancy 3% lower while ADR was $15 higher
  • Promotional spending as a % of casino revenue declined to 32% compared to 36.5% in 4Q09.  In 2010 promotional spend as a % of casino declined 360bps.
  • 27 tables and 79 slot machines were removed from active service in the quarter, sequentially
  • Table drop only increased 3% vs. our estimate of 7% but hold was 1.5% higher than our estimate
  • Using the trailing 7 quarter average table hold of 21.6%, revenues would have been $5MM lower
  • Slot win was $1MM below our estimate due to a 5.9% decline in slot handle vs. our estimate of a 3% decline