A BIG MUFF

The Teflon Don of the gaming industry finally punted. I caught wind of this in Macau last week and wrote about WYNN’s VIP market share loss yesterday in “MACAU MARKET SHARE MANIA”. The magnitude of the sequential decline was a surprise, however, due in part to an increase in bad debt expense. It does appear that the company is being appropriately conservative with regards to increasing the uncollectible reserve. The performance of Wynn Las Vegas did not surprise me and investors should take note of how difficult the Las Vegas environment has become. While controlled by Beijing, at least Macau demand remains strong.



  • In the two charts, I’ve looked at some key metrics for Wynn Macau and Wynn Las Vegas. In addition to some seasonality, the sequential downturn at Wynn Macau is attributable to visa restrictions affecting mass market volume and higher junket commission rates at WYNN’s competitors. Not much to say on Wynn Las Vegas. A 12% decline in slot volume was probably the biggest negative surprise while RevPAR held up relatively well. I don’t see a turn here for awhile but WYNN should outperform, if that means anything.
  • So what now? If one is positive on Macau long term, which I am, one has to like WYNN. The visa situation will get better, in my opinion. Wynn Macau is a fantastic property and he really seems to have the market figured out. The service levels are unbelievable. The Encore addition will open next year and WYNN maintains a cheap option on Cotai as well. I think Wynn Macau is one of, if not the prime beneficiary of a potential junket commission cap. In my view, escalating junket commissions are the only reason he has lost VIP share.
  • Most important in today’s credit crisis world: WYNN is on the right side of the liquidity trade with PENN and BYD.
Uncompetitive junket commission rates, seasonality, and the visa restrictions drove the sequential downturn
Slot handle decline most indicative of the tough environment

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