WYNN 3Q11 CONF CALL NOTES

Underwhelming results and no special dividend.  Not quite what people were expecting.

HIGHLIGHTS FROM THE RELEASE

  • Wynn Resorts reported net revenues of $1.3BN and $381MM of Adjusted EBITDA- in-line with consensus estimates
  • Wynn Macau reported net revenue of $951MM and Adjusted Property EBITDA of $296MM
  • Wynn Las Vegas reported net revenue of $347MM and Adjusted Property EBITDA of $85MM
    • 3.1% of total rooms were unavailable during the quarter due to an air rebalancing project compared to 6.2% last year
    • Entertainment growth of 21% YoY was largely due to revenue growth at the Garth Brooks and La Reve shows
  • "Board of Directors has approved a cash dividend for the quarter of $0.50 per common share. This dividend will be payable on November 16, 2011, to stockholders of record on November 2, 2011."
  • Cash: $1.8BN; Total Debt: $3.1BN ($2.6BN in Vegas)

CONF CALL NOTES

  • Had a lower hold in Las Vegas, which if normalized would take them back to $100MM of EBITDA vs. $85MM.
  • In Macau, it's not so much about market share but bottom line - which keeps climbing
  • Doing their budgeting on the work that will unfold over the next few years but special dividends are in fact special and there is no certainty about what the board will decide to do going forward.

Q&A

  • Impact of credit tightening on the VIP segment in China
    • Don't see any change in their business
    • They have never had to increase their reserves because they take adequate reserves
  • Have excess cash in Macau - will go through a financing exercise - combo of bank debt and cash next year 
  • Cash: $1.1BN is offshore and $700MM onshore
  • October trends: "October is gangbusters" 
    • $73MM in Macau so far in October through the 18th
    • In Las Vegas. they are doing about $1.25MM per day
  • Depreciation is a real expense for them.  Eventually if you spend less than D&A in Vegas it catches up to you
  • Promotional activity in Macau.  Usually when a new place opens up, things get more promotional and then come back to normal. 
  • MA & FL are very interesting markets - senses that they are acting in a more stable way which should encourage serious investment in those markets. They are looking at those markets. They are also considering if their brand makes sense in those markets. Feeling very positive in a very preliminary way about MA & FL.
  • Leisure has been pretty stable for them in Vegas - Leisure ADR has improved 21%. Also had another great quarter for convention business. 4Q business is also looking great. 1Q12 is coming in similar YoY for group business for them.  Some people are waiting to get their budgets approved.  March will be a challenge since Con Agra isn't in Vegas. So they may be down on group in the first quarter, but feel like things will be stable for the year.
  • Thinks that there continues to be excess demand than supply in Macau. Thinks that they are in the 3rd or 4th inning of development.
  • They have $30MM of retail profits in Macau per quarter - quite phenomenal
  • Every time a new resort opens in Macau, supply gets fully absorbed. They are not concerned about new supply.
  • Only 1% or less of upscale citizens are coming to Macau right now 
  • No change in days outstanding for credit in Macau
  • Florida perfectly suited for being a destination resort destination.  Miami could be a great destination resort city if done right.
  • Wynn Macau is capacity constrained, but there is an opportunity to optimize business. They manage table limits very prudently. Have a little capacity mid week. 
  • YTD in Macau $956MM, last year $561MM EBITDA - through October 18th.  Even for the month, they are up 30% so far. Headed for another $100MM+ month.
  • Cotai update: The government issues a draft contract - which has been signed. That is usually associated with the final approval stages.  A premium was already set.  They are waiting for the gazetting to happen. They have already submitted their plans to the government. When the gazetting takes place, hopefully they can start construction. In Cotai, their hallways are 8 feet wide and 11 feet high. Laying foundation will take a lot of time. Sometimes they need to fill 92 meters and as little as 78 meters.  Between keystones and pile caps, that's almost 10 months of work.  Once they are done they can build one floor per week. 
  • Doesn't think it's relevant to compare the past timelines to now since the approval process is now taking longer. They are going to be the first stop at the monorail. 
  • It's possible to spends hundreds of millions of dollars on foundation 
  • Why was corporate expense so high? It can be choppy but they should be similar in 2011 to 2010 for FY
  • Low hold in the quarter was due to bacarrat. They come in groups - they had some guys win a few million here and there. This month was off by 3-4% - $15-20MM. It wasn't just one event - they are too big for that. 
  • Market share trend in second week of October?
    • Their market share is up
  • According to Steve, the current table cap has to do with the current tables not for future developments, i.e. those that fall outside the limit