Wynn Resorts: 1Q19: VIP Blues but Mostly as Expected
Morgan Stanley Research says: “This was expected given market trends”
WYNN felt the pressure of weak high-end Chinese play in both Vegas and Macau, so while mass trends were strong, with Macau core mass up 13% and Las Vegas slots up 11%, EBITDA was down 12% y/y, reportsMorgan Stanley Research: “This was expected given market trends, and 1Q EBITDA was only 1% below our estimate. We adjust ests, and remain EW,” adds the finance analysts,
1Q19 Results. WYNN reported 1Q19 property EBITDA of US$495m, slightly below MSe US$501m / cons US$507m. “We lower our 2019/2020 estimates to reflect weaker underlying VIP trends and a slower ramp at Encore Boston Harbor, and now forecast total 2019/2020 property EBITDA of US$1,965m/$2,326m vs. prior US$2,036m/$2,381m.
MSR adds that, “That said, with China macro trends appearing stronger, WYNN’s raised dividend (now $4 annualized vs. prior $3), and the removal of the Massachusetts license overhang for WYNN, we raise our 2020 valuation multiple to 11.0x from 10.3x. As a result, our price target rises slightly to $135 from $130; remain Equal-weight.”
Macau. 1Q19 property EBITDA of US$387m was between MSe US$391m/cons $383m, supported by US$25m of high hold (high hold was expected, but not to this level). Market share was 15.3% and with high hold, down from 16% in 2018. WYNN is suffering from being more exposed to the VIP and premium mass segments of Macau, which are seeing the greatest weakness. Its core mass market revenue was up 13%, but that was not enough to offset the other segments. In addition, WYNN is renovating parts of its peninsula property, and highlighted increased competition in Cotai from MGM’s new mansions and MLCO’s Morpheus tower. “We lower our 2019e Macau EBITDA estimate to $1,424m from $1,462m to reflect slightly lower share (15.1% vs. 15.3%) mostly coming from the peninsula, but given the 2019 renovation headwinds, our 2020 estimate comes down less to US$1,555m from US$1,571m,” states MSR.
Las Vegas. 1Q18 property EBITDA of US$108m came in lower vs. MSe US$110m/ cons $124m. The property also benefitted from US$5m of high hold, but was hurt by US$4m of bad debt. Table drop was down 25% but management noted ex baccarat, it would have been up 10% y/y, and slot handle was up 6%. RevPAR declined 2%, but as expected given a large group shifted from 1Q to 2Q. Management also noted baccarat trends had improved in 2Q, with MSR 2Q-4Q19 estimates dropping only slightly, “and we forecast 2019/2020e Vegas EBITDA of US$460m/$516m vs. US$466m/$521m prior”, adds the analysts.
