WYNN OVERCOMES ‘O’

Even the “greatest wet blanket” couldn’t dampen another blockbuster quarter at Wynn Las Vegas. Oh, and Macau helped too.

 

 

“And I'm saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime.”      

 

 – Steve Wynn

 

 

WYNN blew away our Q2 EBITDA estimate by 10%, and we were way ahead of the Street.  Despite the “the weird political philosophy of the President of the Unites States”, Steve managed to put up another blockbuster quarter in Las Vegas.  Then again, Steve had Lady Luck on his side this quarter – not sure about Obama and his Keynesian plan to revive the economy.  We estimate that hold favorably impacted the quarter revenue and EBITDA by $39MM and $28MM, respectively.

 

Overall, we’d say this was a terrific quarter.  While Macau EBITDA didn’t beat us by much, we were high on the Street.  After numbers go up, the question will be, “what’s next?”  We think Wynn Macau is a market share retainer at best and will likely lose share over time.  Market growth remains incredibly strong, but that benefits everyone.  What is the next catalyst?  MPEL for instance has many more catalysts, is cheaper, and probably has higher upcoming earnings revisions. 

 

Below are some observations and takeaways from the quarter. 

 

Macau

Wynn Macau generated $977MM of net revenue and $314MM of EBITDA, which were in-line with our estimates. 

  • VIP net table win was $12MM below our estimate
    • Direct play was only 8% vs our estimate of 10%
    • The rebate rate was 30.5% (vs. our estimate of 30%) or 88bps
    • Mass revenues were $6MM above our estimate
      • Drop increased 26% YoY vs our estimate of 44%; however, hold was 27.8% vs. our estimate of 23.5%.  Wynn’s hold since 2Q10 (when they opened Encore) has been 25.5% if we include the current quarter
      • We estimate that high hold benefited Mass revenues by $16MM and EBITDA by $10MM
      • Net non-gaming revenue was $3MM below our estimate due to higher comps
      • Fixed expenses were $93.4MM – in-line with our estimate

Las Vegas

Las Vegas results of $391MM of net revenue and $133MM of EBITDA blew away our estimates by 10% and 41%, respectively. 

  • Casino revenues came in $24MM above our estimate, entirely due to high hold on Wynn’s baccarat business
    • Table drop of $535 million was right in-line with our estimate, but hold of 27.6% was materially higher
    • Using the mid-point of Wynn’s normal range of 22.5% - we estimate that hold benefited the quarter by $27MM on net revenue and $21MM on EBITDA.  If we use the trailing 5 quarter hold rate of 23.8%, the benefit on revenues and EBITDA would have been $20MM and $16MM, respectively
    • Slot revenue was $1MM below our estimate
    • Casino discounts were 15.9% of gaming revenue or $30MM
    • Non-gaming revenues were $10MM better than we estimated due to better F&B results
    • Total operating expenses of $258MM declined $5MM sequentially and only increased 2% YoY

 

WYNN OVERCOMES ‘O’ - WYNN