Wynn's profits rise but game plan is for Cotai

PUBLISHED : Wednesday, 09 May, 2012, 12:00am
UPDATED : Wednesday, 09 May, 2012, 12:00am


Wynn Macau, the Hong Kong-listed unit of Las Vegas casino mogul Steve Wynn, posted a 10 per cent year-on-year increase in first-quarter profit to US$209 million.

But one analyst says the company, which has a resort on the Macau peninsula, will continue to lose business to casinos on Macau's Cotai Strip until Wynn opens its own gaming house there.

The Macau government has given Wynn approval to acquire a 20.6 hectare site in Cotai, where Wynn will build its second resort in the world's biggest gambling enclave.

CIMB Securities analyst Teng Yee Tan said he did not expect the new project to open before 2016 because Wynn usually set a high standard for its properties.

Citigroup analyst Anil Daswani agreed on the projection, saying in a research note that 'we continue to believe a new project of this scale is unlikely to open much before late 2016'.

'With the large capital expenditure expected, we believe Wynn Macau could halt its special dividend,' Daswani said.

Daswani said in another note that Wynn had a 12.9 per cent share of gross gaming revenue in Macau last month, a share that was likely to decline. Although the Macau government has recently gazetted Wynn's Cotai project, the group will continue to lose market share to [rivals on] Cotai before its own property opens,' the analyst said.

The core of Macau's gaming industry is moving to Cotai, which is already home to Galaxy Entertainment, Sands China and Melco Crown Entertainment.

Gross non-casino revenues increased 12.9 per cent during the quarter, to US$106.3 million, 'driven by strong performance from all non-casino segments', Wynn said in a filing to the Hong Kong stock exchange.

The city's gross gaming revenue in April came in at 25 billion patacas, up by 22 per cent year on year.

'We continue to like the Macau story for its long-term outlook, but recommend investors choose their entry points carefully,' research firm Jefferies said in a research note.

The parent company, Nasdaq-listed Wynn Resorts, has been plagued by a legal war with former long-time partner Kazuo Okada, who opposed the company's HK$1 billion pledge in July 2011 to the University of Macau Development Foundation.

Wynn declared a quarterly dividend of US$0.50. Its shares gained 0.2 per cent in Hong Kong trading, closing at HK$22.90. The benchmark Hang Seng Index fell 0.25 per cent.