Bad baseball references aside, we were relieved to see Wynn’s Mass aggression drive high revenue growth and deliver an outstanding quarter.
“Whoa! You guys are way too high” – Hedgeye client in December regarding our Q4 EBITDA estimate
Au Contraire Mon fraire. Wynn beat our Street high EBITDA and EPS estimates quite handily, although high hold in Las Vegas certainly helped. While there weren’t quite as many positive longer-term takeaway as with LVS the day before, WYNN’s quarter was certainly stronger.
WYNN became our favorite long in the gaming space in early December. As we articulated in our 10/25/13 note “WYNN TO FEAST ON THE MASS COMPETITION”, Wynn Macau began (finally) to push Mass marketing and promotional activity in October. For this reason, the stock moved into our #1 position in the space – WYNN was going to become a growth story again! The bear thesis that Wynn Macau was running at full capacity? Not true.
Well, once again Steve Wynn knocked it out of the ballpark – or as Wynn Macau’s GM Ian Coughlan said, “we smacked others out of the park”. We can forgive the Irish lad for the not so perfect baseball reference, after all he is great at hurling references I’m sure, and of course running Macau properties.
As we saw from the monthly Macau GGR reports, Wynn was a Mass market share gainer in Q4 and clearly the flow through was quite strong, as we saw from the earnings release. Shareholders are rejoicing that there is a near-term angle to this great long-term story.
Speaking of the long-term, we again heard an interesting South Korea reference. Steve Wynn mentioned he was in Seoul last week on top of Sheldon Adelson, unsolicited, bringing up the prospects for South Korea integrated resorts during the LVS conference call Thursday night. South Korea has fallen into the background with all the Japan focus but as we wrote about last year, it’s a real and potentially huge market. Back to Japan, here is where we heard arguable the only negative takeaway. Steve Wynn laid out a longer time horizon – possibly 2 years – for the legalization of gaming in Japan.
So where do we go from here? After a likely strong opening today, WYNN should trade within 5% of the January 17th high. More near-term catalysts remain. Notwithstanding bad luck at Wynn Macau here in January, Wynn should continue to pick away a little Mass market share over the coming months. Moreover, market growth should accelerate into the 20%+ area in February from 11-15% here in January. Longer-term Wynn may not be quite as well positioned at LVS but it’s hard to argue against this other long-term growth/cash flow story.