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  • Q2 2023: Macau bounces back to drive 76% growth at Wynn Resorts

Wynn Resorts has reported a 76% revenue surge in Q2 2023, propelled by exceptional growth in its Macau operations.

Topline numbers

For Q2 2023, Wynn Resorts reported a substantial increase in revenue, reaching $1.6bn, up 76% on Q2 2022.

Net income stood at $105.2m, marking a stark contrast to the net loss of $130.1m incurred in the same period of 2022.

Diluted net income per share also reflected this positive trend.

In the second quarter of 2023, the diluted net income per share reached $0.84, a substantial improvement from the diluted net loss per share of $1.14 reported in the prior year’s quarter.

Meanwhile, Wynn recorded an adjusted property EBITDAR of $524.5m, up 192 % on the group’s Q2 2022 result.

This robust performance was underpinned by notable increases in operating revenues across various segments of Wynn Resorts’ portfolio.

News nugget

In particular, Wynn Resorts showed impressive growth in its Macau operations as post-Covid normalisation continued.

Operating revenue at Wynn Palace soared by a staggering 698% to $468.4m in Q2 2023.

Wynn Macau also contributed to this upward trajectory, with operating revenue reaching $301.6m. This figure marked a 414% increase compared to Q2 2022.

In the US, however, growth slowed. The company’s Las Vegas operations generated operating revenue of $578.1m, up 3% on Q2 2022.

Encore Boston Harbor reported revenue of $221.9m in the second quarter of 2023, an increase of 5.6% compared to the second quarter of 2022.

“Our second quarter results reflect continued strength in North America and Macau,” said Craig Billings, CEO of Wynn Resorts. “In Macau, the post-COVID recovery accelerated during the quarter.

“We were encouraged by the meaningful uptick in visitation and demand we experienced during the quarter, with particular strength in mass casino drop, direct VIP turnover, luxury retail sales, and hotel revenue, all above Q2 2019 levels,” he added.

Moreover, Wynn will begin construction on Wynn Al Marjan Island, “which we believe will be a ‘must see’ tourism destination in the UAE,” said Billings.

The group’s online division, Wynn Interactive, generated a loss of $25.7m in Q2 2023, compared to a loss of $57.3m in Q2 2022.

Billings commented: “Our EBITDAR burn rate decreased both sequentially and year-over-year to $15m in Q2 2023. Our team continues to stay disciplined on costs, while driving improved marketing efficiency.”

Best quote

“I see tremendous value in our business, and I know our brightest days are ahead of us. Our path is the clearest it has been in years, and our team is committed and energised.”
Wynn CEO Craig Billings

Best question

Wynn did not offer many insights into its online segment, so Chad Beynon from Macquire asked for some more details. He also asked whether Wynn was on track to turn the segment profitable during Q4.

Billings responded: “I don’t think we ever said it would breakeven in the fourth quarter. But what we are focused on is making sure that it goes down every quarter.”

CFO Julie Cameron-Doe added: “Sports betting is a tough business. It’s about the game of commodity, but we’re very focused on managing this business. We’ve got a very long-term shareholder-friendly view on it. So that’s our focus.”

Current trading and outlook

Wynn Resorts saw a slight uptick in trading after presenting its results.

Billings emphasised a significant shift in the company’s business dynamics, where a larger portion now comes from mass-market customers compared to VIP clients.

Notably, on the mass-market side, there has been a decrease in the average length of stay, which is understandable given the impact of Covid-19.

“During Covid, if you made the commitment to come, you were coming for an extended period, but we’ve seen spend per customer actually go up,” he added.

This shift has led to a strategic advantage, said Billings, allowing for more efficient utilisation of their accommodations and ultimately benefiting overall business performance.

Wynn Resorts has appointed Paul Liu as a member of the company’s board of directors effective 3 August 2023.

Liu boasts significant professional experience in entertainment, hospitality, and financial services, both in China and the Asia Pacific region.

He will serve as an independent director and Class I member of the board.

Wynn said Liu’s experience of creating guest experiences and understanding of business talent in those markets would offer an important perspective to the existing board.

Liu is fluent in Chinese and was previously based in Shanghai, where he was a partner at Egon Zehnder, a consultancy firm focused on executive search and board advisory.

In this role, Liu led the Services Practice in the Asia Pacific region with a focus on hotels and hospitality, serving both multinational and domestic Chinese companies.

He was previously the COO of entertainment powerhouse Anschutz Entertainment Group China and was also founder and CFO of luxury lifestyle destination Three On The Bund.

Liu began his career with 14 years in finance at JPMorgan, UBS, Peregrine and Bank of America during spells in both New York and Hong Kong.

Elsewhere, Liu worked on founding and organising the Barnett-Oksenberg Lecture on Sino-American Relations as part of his role as a serving member of the National Committee on US/China relations.

Las Vegas-based casino operator Wynn Resorts also runs two integrated resorts in Asia, including Wynn Macau and Wynn Palace Cotai.

Wynn is set to report its Q2 2023 financial results tomorrow (9 August 2023).

The six licensed casino operators in Macau have revealed the terms of their new, 10-year gaming concessions granted by the special administrative region’s (SAR) government.

Under the agreements SJM Holdings, Galaxy Entertainment, Melco Resorts, MGM China, Sands China and Wynn Macau will each pay an annual fixed premium of MOP30m (€3.5m) and a variable premium related to the number of gaming tables and machines operated.

The variable premium will consist of MOP300,000 per VIP gaming table, MOP150,000 per mass gaming table and MOP1,000 per gaming machine on each operator’s premises.

The total variable premium for each operator may not fall under the amount required to operate at least 500 gaming tables and 1,000 electronic gaming machines.

Assuming all of those 500 gaming tables are mass tables rather than VIP, the figures suggest a minimum annual variable premium of MOP76m in addition to the MOP30m fixed premium.

Melco chairman and CEO Lawrence Ho: “Melco pledges its commitment to supporting the healthy and sustainable development of the tourism and leisure industry in Macau as we continue to work with the government over the next 10 years to contribute to the city’s development as a preeminent, global tourism destination.”

In addition, the concessions demand a special gaming tax payable at a rate of 35% of GGR, in addition to contributions of 2% of GGR to a public fund for the promotion, development and study of cultural, social, economic and other activities, as well as 3% towards a separate fund for urban development, touristic promotion and social security.

Furthermore, the operators have agreed to implement both gaming and non-gaming investment projects worth billions of Hong Kong dollars.

“On behalf of Melco, we are honoured and grateful for the Macau SAR government’s granting of the ten-year gaming concession to the company, and we are thankful for the government’s running of a smooth and transparent process,” said Melco’s chairman and CEO Lawrence Ho.

“Melco pledges its commitment to supporting the healthy and sustainable development of the tourism and leisure industry in Macau as we continue to work with the government over the next 10 years to contribute to the city’s development as a preeminent, global tourism destination.”

Market reactions to the details of the concessions suggest investors may have been hoping for more favourable terms for the operators.

Shares in all six firms fell by between 3.9% and 13.4% after the market opened today (19 December). Still, over the past month, shares in the operators are trading up significantly, as prices have increased between 15% and 80%.

Shares in Macau casino operators jumped today after the region’s government confirmed all six incumbent operators would have their licences renewed for a further 10 years.

Wynn Resorts Macau, MGM China, Sands China, SJM Holdings, Galaxy Entertainment and Melco International Development all saw their valuations increase off the back of the news.

In September, the six companies above – in addition to Genting Malaysia, which did not previously hold a licence in Macau – submitted bids to be awarded one of six licences to operate casinos in the region, beginning 2023.

It was announced on Saturday (26 November) that the six incumbents would have their licences renewed for a 10-year period, while Genting’s attempt to secure approval was rejected.

Wynn Macau saw the largest share price rally of all the approved operators, as shares traded some 15.1% higher when the market opened on Monday (28 November).

Shares in MGM China jumped 13.1%, while Sands China, Melco International Development and SJM Holdings saw their share prices increase by 8.4%, 8.2% and 7%, respectively. Shares in Galaxy Entertainment Group rose by just 0.5%.

Sands China chairman and CEO Robert Goldstein: “In the coming decade and beyond, we will remain steadfast in our strategy of continuous investment in Macau – in its economy, its people and its community.”

The six successful bidders will now negotiate with Macau’s government to finalise the terms of their new agreements, which are expected to be signed before the end of 2022 and become effective in January under a new gambling law in the region.

Several of the licensees expressed their gratitude and continued dedication to the region of Macau in response to the news.

“Our commitment to Macau has never wavered and we are honoured to continue the partnership we began with the government and people of Macau 20 years ago,” said Sands China chairman and CEO Robert Goldstein.

“In the coming decade and beyond, we will remain steadfast in our strategy of continuous investment in Macau – in its economy, its people and its community. Macau’s future as an international tourism destination remains bright and we look forward to furthering our leadership role in helping it reach its full potential.”

Macau’s casino sector has faced one hurdle after another since the onset of the Covid-19 pandemic in 2020.

With widespread restrictions on travel and hospitality, operators in the region have taken several successive quarters of financial strain as visitor numbers to properties have remained historically low.

For the most part, share prices of operators in the region remain at least 50% below pre-pandemic prices.

Stocks of land-based casino operators with a presence in Macau rallied today after the jurisdiction’s government unveiled the details of its new regulatory regime on Friday (14 January).

In September, authorities in the Chinese territory wiped billions off the value of US-based listed operators by suggesting business-friendly legislation could become significantly more authoritarian.

Proposed restrictions on operators included the appointment of government officials to monitor business activity from inside companies, including a seat on the board in some instances, while many operators also began to fear for the renewal of their licences.

It was suggested that Macau would fall prey to a wider crackdown on gambling activities across China, and that the nation’s government was unhappy that US shareholders were making profits on foreign turf while taking money out of the local economy.

Instead, draft measures announced on Friday were kinder than anticipated for the industry. Share prices immediately rebounded for major operators including Sands China, MGM China and Wynn Macau.

Officials revealed on Friday that the authorities will offer six casino licences with terms of up to 13 years by public tender, when existing licences expire in June.

While this represents a reduction in term length from the current 20-year contract, analysts expect all of Macau’s dominant players to retain a presence in the market.

In addition to allaying fears around the issue of licensing, Friday’s announcement also reassured investors that Macau would not raise its gaming tax as previously suggested.

Further, it would not require a government observer to keep an eye on operators from within.

Share prices for the region’s major operators reflected increased confidence, with Sands China, Wynn Macau and Galaxy Entertainment Group up 14.6%, 11.9% and 7.0%.

“Some of investors’ biggest fears should now be alleviated,” said analysts at JP Morgan.

“We were surprised the government’s stance on some contentious topics has become far less onerous, if not surprisingly accommodative, in this draft gaming law versus initial plans during the public consultation.”