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Terrific across the board but Vegas the real standout again.
HIGHLIGHTS FROM THE RELEASE
- Net revenues of $1.37BN and Adj EBITDA of $447MM
- Macau: Net revenue of $977MM and EBITDA of $314MM
- Las Vegas: Net revenue of $391MM and EBITDA of $133MM
- "Board of Directors has approved a cash dividend for the quarter of $0.50 per common share... payable on August 11, 2011, to stockholders of record on July 28, 2011."
- "Charitable contribution made by Wynn Macau to the University of Macau Development Foundation... consists of a $25 million contribution made in May 2011, and a commitment for additional donations of $10 million each year for the calendar years 2012 through 2022 inclusive, for a total of $135 million."
CONF CALL NOTES
- Volume increases in baccarat and other table games. Had amazing hold in baccarat.
- In non-casino, they had a 15.7% increase - hotel cash revenue was their highest in history.
- Hold impact in Las Vegas- Normalized EBITDA was in the neighborhood of $115MM
- We calculate the hold impact on revenue was $30MM and roughly $25MM on EBITDA, much more than management indicated
- They are still 50% reserved on their receivables bucket
- Segment margins in Macau?
- They don't give segment margins but margins are increasing as volumes increase. Competition hasn't dented them yet.
- Vegas trends:
- July is usually a black hole for them... August picks up for them and then September is good and October sells out for them
- July occupancy is actually better than they thought - all of that is last minute bookings - 48 to 72 hours in advance. They have not lowered rates.
- The fourth quarter looks great and now that they are getting through July they are doing well. They're tracking around $1MM/day in July. Convention business is totally sold out in July.
- The land granting process in Macau is continuing. They are proceeding with their soil research until then.
- The latest Gazette just came out and there was no mention of new concessions.
- Cotai: 1500 rooms - with room to expand, 500 tables. They are thinking about building a separate hotel with 200 rooms with no casino so government officials can stay there.
- Thinks that Galaxy Macau did a good job but they aren't affected by it.
- He is naturally interested in Singapore but there is a moratorium on new licenses until 2017. If they had the chance to be in business in Singapore, they would be thrilled but that decision is not theirs to make now
- They don't know how their competitors in Vegas are doing. They recently spent $200MM on renovations in Vegas. Their guess is that everyone is doing better this year than last year.
- For 2012, they are tracking on pace for convention rooms in-line with this year, with any upside from price. There are some big conferences that benefited 2011 that won't benefit 2012. Chinese NY and Superbowl fell on 2 weekends vs. one.
- There are a host of opportunities to expand in Las Vegas, but is afraid of the political environment in Las Vegas from this administration which he thinks is the biggest wet blanket on the economy
- The government was very specific in stating that they do not want apartments on Cotai
- Their LV properties are benefiting from international travelers
- They are keeping a close eye on MA gaming legalization. They would be interested depending on the legislation.
- Wynn Resorts has zero debt, which gives them lots of flexibility to fund new projects. Will stay under leveraged.
June airport data was a positive but a lot of the YoY GGR gain will come from an easy table hold comp.
While there are a lot of wild cards, baccarat hold percentage among the most important, we think the June Strip gaming revenue growth was significantly positive. Our best guess is +9 to 13%. The number of enplaned/deplaned passengers at McCarran Airport increased 5.6% in June of this year over last June. Given higher gas prices, we expect that drive in traffic was down.
The comparison is easy on the table side as hold percentage was only 9% versus a normal 12%. Holding table hold constant with last year, June gaming revenues would only be slightly higher. However, slot hold % was very high last year. Overall, we expect gaming volumes to be up around 3%. Net/net, not a bad follow up to a very strong May.
Here are our projections:
Moving Beyond EBA Conclusions That All is Well
Our view of the European bank stress tests released last Friday is rather dim. We criticized the leniency of the "adverse scenario" assumptions, noting in particular that the actual deterioration since year-end 2010 is already worse than the "adverse" assumptions in some cases. (Contact us if you want to see our full note.)
While we consider the loss assumptions to be balderdash, the stress tests were valuable in that they disclose a wealth of bank-specific data around sovereign and commercial exposures by country. Clearly, the greatest default risk is currently in Greece, Portugal and Ireland. Italy and Spain, while on slightly more stable ground, are rapidly deteriorating as well.
In the tables below, we show the exposure to sovereign debt and commercial loans by bank to each PIIGS country. Specifically, we show the top 40 most exposed European banks (among the 91 stress-tested), ranked by gross loans and sovereign debt holdings as a percentage of their Core Tier 1 Capital. Bear in mind that this data is as of December 31, 2010. In addition to showing which banks hold the greatest exposure on a country by country basis, we also show which banks hold the greatest exposure to Greece, Portugal and Ireland collectively, as we view those countries as being at greatest risk for default. Further, we show total exposure to all five PIIGS countries.
We highlight in red those banks with 100% or more of their Core Tier 1 Capital in the form of sovereign debt holdings and/or commercial loans to a given country or group of countries. The total exposure groups (all PIIGS) are presented two ways. First, we show exposure sorted by RWA. In other words we show the PIIGS exposure by bank for the 40 largest European banks. Second, we show exposure sorted by % of Core Tier 1 Capital at risk regardless of the size of RWA.
Summary Conclusions: 13 of the Top 40 EU Banks Hold Over 200% of their Capital in PIIGS Exposure
We find that there are numerous European banks with over 100% of their Core Tier 1 Capital committed to either PIIGS commercial loans or PIIGS sovereign debt holdings. For example, we found that 18 of the 40 largest European banks held 100% or more of their Core Tier 1 Capital in PIIGS sovereign debt or commercial loans. In 13 of these cases, the banks held more than 200% of their Core Tier 1 Capital in PIIGS sovereign debt or commercial loans.
As a general rule we found that the Nordic banks are the least exposed to PIIGS debt, typically holding less than 20% of their Core Tier 1 Capital, putting them at considerably less risk than the group as a whole.
Joshua Steiner, CFA
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