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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Wynn Resorts sees quarterly profits drop

8 May 2012

The decision by Wynn Resorts Ltd. to toss former majority shareholder Kazuo Okada out of the company in February sliced into the casino operator's first-quarter profits.

But as far as Wynn Resorts Chairman Steve Wynn is concerned, the matter in which the Japanese billionaire's 20 percent stake in the company was redeemed at an almost $800 million discount is closed.

Wynn, at the outset of the company's quarterly earnings conference call Monday, wasn't going to address the Okada matter.

"There isn't any new news in the Okada legal issues that we need to report," Wynn said.

During the question-and-answer session, however, Wynn aimed more pointed remarks at Okada, his one-time business partner who was found unsuitable by the company's board of directors over payments of $110,000 in cash and gifts to Philippine gaming regulators. Okada denied the charges and sued the company for breach of contract in an effort to recover his holdings, roughly 24.5 million shares.

"Mr. Okada filed a 100-page foolish countersuit," Wynn said. "I don't have any idea what his mental attitude is toward anything. We acted and completed an action, regained the shares and issued the note. That's where it stands."

Wynn Resorts will pay Okada $1.9 billion through a 10-year note. The shares were taken off the market. The action caused Wynn Resorts' net income to decline in the quarter ended March 31.

Wynn Resorts' net income was $140.6 million, or $1.23 per share. A year ago, the company's net income was $173.8 million, or $1.39 per share.

The company said its net revenue in the first quarter was $1.313 million, up 4.2 percent from $1.26 million in the same quarter of 2011.

Wynn Resorts' two casinos in Macau saw revenues increase 9.8 percent, to $951 million, while revenues on the Strip at Wynn Las Vegas and Encore declined 8.1 percent to $362.8 million. The company said its table games business on the Strip had a lower-than-normal hold percentage - that is, gamblers won more money than what would have normally been expected.

During the conference call, Wynn told analysts the company's earnings are subject to more volatility than other casino operators because of the amount of high-end business that is brought into Macau and the Strip.

"At the end of the day in our business, short-term comparisons are not constructive," Wynn said.

KDP Investment Advisors gaming analyst Barbara Cappaert said the company's results "were weaker than expected on low table hold in Las Vegas. Table hold is something that comes and goes, and that does not concern us."

Much of the conference call focused on Wynn's plans for building a new resort complex on Macau's Cotai Strip. The Macau government approved the land allocation to Wynn last week.

Wynn would not give a budget for the project - analysts have estimated $2.7 billion or more - but said construction could take 36 to 46 months. He said the groundbreaking could take place before the end of the month.

The hotel will have 2,000 rooms and Wynn said he and his design team have spent 28 months developing "something new" for the Macau market.

"We have a wonderful piece of land that we're taking to another level in every aspect of the building and making it delicious," Wynn said. "At some point we have to show everybody what that means."

Wynn said the opening of Las Vegas Sands Corp.'s $4.4 billion Sands Cotai Central in April brought additional business to the region.

Through April, Macau revenues grew 26 percent to roughly $12.4 billion, according to the Gaming Inspection and Coordination Bureau. Last year, Macau produced $33.5 billion in gaming revenue.

Wynn Resorts also announced it would pay a cash dividend for the quarter of 50 cents per common share on June 4 to stockholders of record on May 21.