WYNN WON’T BE WINNING AS MUCH


Some on the sell side will be trying to normalize the low Q4 table hold percentage generated by WYNN in Las Vegas. This isn’t appropriate as Steve Wynn transparently discussed last night.

As we wrote about in our 9/18/08 post, “HOLD % AS A HEDGE TO DROP IS BREAKING DOWN”, when players spend less time gambling, the hold % becomes distorted. Unlike slot machines, table games are not computerized. The actual amount wagered cannot be measured. Only the amount of chips exchanged for cash can be determined. If gambler walks around for an hour with $100 worth of chips in his pocket, the drop will be the same as the one that gambles. Obviously, the casino win will differ.

WYNN/Encore Las Vegas produced a 15% hold versus a normal 21-24%, resulting in a $25-30 million hit to EBITDA on properties that generated only $33 million in EBITDA. That’s the superficial analysis. Now the real analysis: hold percentage is likely to remain depressed in this economic state. Assuming that half of the hold delta was actual “bad luck”, the LV properties significantly missed estimates.

It’s not all bad for WYNN. Wynn Macau actually put up a decent quarter that was pretty much in-line with consensus. Wynn’s commentary about Macau was surprisingly positive, unlike the very somber tone of the Las Vegas discussion.

The stock deserves to go down today but it has already been hammered so much that it may find a bottom pretty quickly. We’ve consistently predicted a disastrous WYNN Q4 since our 12/10/08 post on Macau so it should not have been a huge surprise.