WYNN: GOOD ENCORE, BAD ENCORE

News of some firings at Wynn Resorts is making the rounds in Macau. Apparently, some top people heading up WYNN’s design and development team in Macau were fired or transferred and replaced by individuals from Las Vegas. It’s been my understanding that Encore Macau is on time so this news is surprising. I’ve been more worried about Encore Las Vegas where the opening is likely to be delayed into 2009, in my opinion, missing the important New Year’s week. Moreover, I believe the total budget may come in higher than the current $2.3bn budget (up from $2.2bn noted in the Q1 10Q). WYNN has a history of escalating budgets as displayed in the chart. While not commenting on the Macau personnel situation or the budgets, management did indicate that both Encore projects were on time. We shall see.

Along with other gaming stocks, WYNN has had quite a run over the past few weeks. Sagging fundamentals and escalating budgets are hitting industry ROI from both sides. Mixing lower returns and a higher cost of capital is not a recipe for continued stock price outperformance.



WYNN has a history of escalating budgets

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