Wynn defies bottom line with US$135m donation

Who says Hong Kong investors only care about profit?

Shareholders in casino operator Wynn Macau swallowed a 9.2 per cent drop in second-quarter net profit after the company's board decided to make a massive US$135 million donation to the University of Macau Development Foundation.

While it will be paid out in annual instalments until 2022, the year most Macau gaming licences are set to expire, the total sum appears to be the largest single donation made by a Hong Kong-listed company to date.

Stripping out the effect of a one-off charge related to the donation, Wynn Macau's profit would have soared around 70 per cent in the second quarter to more than US$220 million.

Revenue and cash flow both hit record levels on surging high-stakes gambling volumes. But as it stands, the company reported profit of US$120.33 million, down 9.2 per cent from US$132.52 million a year earlier.

While Hong Kong tycoons like Li Ka-shing, Stanley Ho Hung-sun and the late Henry Fok Ying-tung have been known to make donations on a comparable scale, they have tended to do so either as individuals or via their charitable foundations - not via listed firms under their control.

Annual donations in the tens - and in a few cases, hundreds - of millions of Hong Kong dollars are not uncommon among large locally-listed firms. Disasters like the 2008 earthquake in Sichuan can prompt additional one-off donations.

Such donations by listed firms generally require the approval of the board of directors, but do not need to be put to a shareholders' vote.

But locally listed firms seldom shell out hundreds of millions, let alone a cool HK$1 billion, even for the best of causes.

One prominent recent exception was Guangzhou government-owned Denway Motors, which was criticised last year after its profit for 2009 fell 8.2 per cent to 1.92 billion yuan (HK$2.3 billion) following a 300 million yuan donation to Guangzhou's Asian Games organising committee.

Wynn Macau's donation to the University of Macau includes a US$25 million payment made in May. That is to be followed by 11 annual payments of US$10 million each from next year until 2022.

'With this commitment to the University of Macau Development Foundation, the board of directors of Wynn Macau and all of its shareholders in China and the United States are dedicated to the education of the people of Macau,' company chairman Steve Wynn said at a May cheque presentation in Macau, according to a release on the university's website.

The Hong Kong firm, which is 72.3 per cent owned by Nasdaq-listed Wynn Resorts, said yesterday its second-quarter net profit was affected by a one-off charge of US$107 million that represented the present value of the donation.

Wynn is one of several casino developers including MGM China and SJM Holdings that are seeking land grants from the Macau government in order to establish a footprint on the Cotai Strip, where rival operators Sands China, Melco Crown Entertainment and Galaxy Entertainment Group are already operating gaming mega-resorts.

'The land granting process is continuing,' Wynn said yesterday on a conference call.

'We're moving right along nicely and on schedule.'

Wynn said his plans for a Cotai property, which had been in the works for several years, call for a 1,500-room casino hotel with 500 gaming tables, restaurants, shops and a large theatre.

'This project is going to justify the time it took to create it,' he said. 'It is a humdinger.'