The conf call discussion conveniently omitted high hold and market share decline in the Macau Mass segment.



We found the quarter somewhat disappointing.  Not so much Las Vegas, which was a disaster, but more Macau and more specifically, Wynn Macau’s Mass performance.  Wynn Las Vegas/Encore was legitimately bitten by the low hold bug and normalizing hold would’ve resulted in EBITDA in-line with our projection.


Wynn Macau EBITDA of $142 million was right in-line with our estimate so why are we disappointed?  Well, we knew Mass revenues were going to be north of $500 million but we didn’t know that the property played as lucky as it did.  Indeed, Mass volume at Wynn Macau was only up 5% in Q4, which means the property lost a lot of market share in Q4.  Hold percentage was 290bps above the midpoint of the normal range which benefited the property by about $8 million in EBITDA.


The high Mass hold was not discussed on the conference call.  Rather, management pointed out that low hold cost Las Vegas $14 million in EBITDA, and VIP hold in Macau was at the low end of the range (resulting in only a $3 million EBITDA hit per our calculation).


Back to the Mass market share issue:  in Q4, Mass revenue for the Macau market increased 35%.  We don’t know what the overall hold was for the market but the law of big numbers tells us it was probably closer to normal than Wynn Macau's.  Wynn only grew its Mass volume by 5% while overall Macau Mass revenue increased 35%.  That’s a pretty big drop. In January, we know that the overall Mass business grew 42%, but Wynn Macau only generated a 2% increase.  We don’t know what Wynn’s hold % was in January but it would have to be extremely low to fully explain the loss of market share. It does look like Wynn’s overall market share will bounce back a bit in February but we don’t have the details yet.


In the following chart, we’ve normalized Wynn’s Mass revenue for variances in hold percentages – 20% is assumed normal.  The market share degradation can be clearly seen.


WYNN LOSING A LITTLE MASS APPEAL - wynn macau normalized mass market share


Why do we care so much about Mass market share?  Wynn does very well in VIP but the profit margins are so much higher in Mass.  Moreover, we are expecting a pretty sharp deceleration in VIP volumes for the market, consistent with past tightening of liquidity and sequential economic slowdowns in China.  Also, comparisons get more difficult in 2H 2010. 


In the interest of objectivity, we would point out that management’s Q1 commentary was very positive regarding Macau.  However, we already know that Macau revenues ytd are up about 60% so this should not be a surprise.  What may surprise people is that Wynn Macau’s revenues are likely up less than that of the market.  Due to low hold and Mass volume share declines, Wynn Macau was able to generate a revenue increase of only 27% in January vs. the market at 66%.

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