Wynn Macau's revenue drops 32 per cent; Wynn Palace project suffers delays
“We believe Macau casinos will experience further short-term pain this year" - S&P
The opening of Wynn Macau’s Cotai project Wynn Palace will be delayed due to construction permits, the second casino resort in Macau to have its launched date pushed back, as the firm posted a 32 per cent decline in revenue in the fourth quarter, dragging down earnings at Las Vegas, Nevada-based parent Wynn Resorts.
Although the US$4.1 billion Wynn Palace is on budget, management said they expect it to launch sometime in the first half of 2016 instead of a previous target date to operate before next year's Lunar New Year holiday.
The delay was due to the timing of construction worker permits and follows Sands China’s announcement that they would push back the opening of the Parisian from late this year to early next year, also due to labour issues.
“In the latest round of permits, they received 700 workers after requesting 1,000 and the approvals came three months late. Wynn said they need another 1,600-1,700 from upcoming approvals. ..We believe a delay to 2016 projects would mean a better and longer headstart period for 2015 casino openings from Galaxy and Melco,” a Barclays report published yesterday said.
Galaxy Phase II and Broadway resort will launch on May 27 and Melco Crown Entertainment’s Studio City is due later this year.
The Hong Kong-listed company’s weak results announced on Wednesday followed last month’s report by the Macau government, which estimated that the city’s gross gaming revenue last year decreased 2.6 per cent to 351.5 billion patacas (HK$334.3 billion) from the previous year.
That marked the lowest gross gaming revenue level since 2002, according to a research note by Daiwa Capital Markets analyst Jamie Soo.
Sophie Lin, a credit analyst at ratings agency Standard & Poor’s, said on Monday: “We believe Macau casinos will experience further short-term pain this year. We have lowered our revenue forecast because of the significant impact of China’s anti-corruption campaign and more stringent execution of regulatory controls on gaming activities in Macau than we previously anticipated.”
In a filing with the Hong Kong stock exchange, Wynn Macau said its fourth-quarter net profit dropped 49 per cent to US$139.7 million from US$275.9 million a year earlier on weaker casino and non-casino revenue at its Las Vegas-style integrated resort complex.
Total revenue in the three months to December reached US$761.2 million, down from US$1.12 billion in the same period in 2013.
Earnings before interest, taxes, depreciation and amortisation – ebitda, a gauge of a company’s operating profitability – plunged 35.5 per cent to US$241.2 million from US$374.2 million a year ago. Shares of Wynn Macau in Hong Kong fell 1.55 per cent to close Wednesday at HK$21.55.
That may have marked the worst fourth-quarter performance in the coverage of Daiwa analyst Jamie Soo, who earlier forecast Wynn Macau’s ebitda last quarter to fall 29 per cent year on year.
As a result, parent Wynn Resorts on Wednesday reported that its fourth-quarter revenue reached US$1.14 billion, compared to US$1.52 billion a year earlier.
The slide in Macau’s gaming-led economy began after Beijing started to crack down on corruption and the mainland economy began to slow. The central government also restricted the use of UnionPay debit cards in Macau to curb illegal money transfers from the mainland.
In his December trip to Macau to mark the 15th anniversary of the former Portuguese enclave’s handover to China, President Xi Jinping stressed the city should diversify its economy and transform into a global tourism and leisure centre. It was a message widely interpreted as a call to broaden the economy beyond gaming.
“The transition process of this structural shift in Macau gaming’s revenue mix could result in sustained sector headwinds,” Soo said.
“Thus we expect to see sustained selective crackdowns by China impacting the sector during 2015, including more policies targeting capital outflows from China and the frequency of high rollers’ visits to Macau.”