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Howard Stutz
 

Wynn Resorts sees reduced profits from Macau market slump

30 July 2015

Macau's slumping casino market contributed to a 72 percent decline in profits at Wynn Resorts Ltd. in the second quarter.

Company Chairman Steve Wynn said the weakness in high-end baccarat business, which has caused Macau's overall gaming revenue to decline in each of the past 13 months, is starting to hurt the company's business in Las Vegas.

"We're the operator of choice for the international baccarat business," Wynn said on a conference call with analysts Wednesday to discuss results for the quarter that ended June 30. "When that group diminishes, we suffer the most."

Wynn said its two resorts in Macau brought in revenue of $617 million, a 35.8 percent decline compared to a the same quarter a year ago. The figure accounted for almost 60 percent of the company's $1.04 billion in total revenue during the quarter.

The revenue declines cause Wynn's overall net income to dip to $56.5 million, or 56 cents per share. A year ago, the company's profits were $203.9 million, or $2 per share. Overall, Wynn's total revenue fell 26.3 percent.

Wynn Macau saw its cash flow decline 43.5 percent in the quarter and the company cited "weakness in the gaming segment" as the primary reason for the drop.

"Macau continues to be more of a question than a certainty," Steve Wynn said.

Meanwhile, revenue from Wynn's two Strip resorts declined 6.2 percent in the quarter to $423.5 million. Casino revenue in Las Vegas was $134.7 million, a 26.2 percent decrease. The company saw increases in its nongaming businesses in Las Vegas, including a nearly 1 percent hike in hotel revenue, a 8.7 percent increase in entertainment and retail revenue and 4.8 percent jump in other revenue.

"In Las Vegas we have a comfortable business," Steve Wynn said. "We are enjoying noncasino revenue that is acceptable. Our base business tends to be pretty steady."

Wynn's stock price has tumbled almost 56 percent percent from its 52-week high of $219.20. Shares closed Wednesday on the Nasdaq at $96.03 down $1.98 or 2.02 percent.

In an investors note before the earnings call, Union Gaming Group analyst Christopher Jones said were three things needed to be done to boost the company's value — stability in its quarterly dividend, an optimistic look at Las Vegas and margin structure in Macau.

"With our long-term thesis primarily predicated on the opening of Wynn Palace on Cotai, we recognize the road to that opening will be bumpy given the headwinds currently persisting in Macau," Jones said.

In a statement, Wynn Resorts announced a 50 cents per share dividend for the quarter.

On the development front, Wynn said the company is moving forward with its $4.1 billion Wynn Palace project on Macau's Cotai Strip, which is expected to open on March 25.

However, a $1.7 billion resort project in Everett, Mass., has been stalled. The company was awarded a gaming license last November.

Wynn told analysts the investment was the largest for a single project ever seen in the state.

"We build resorts and we are bringing to Boston a destination resort," he said. ""Hopefully, they will treat us with softer hands. It will feel good when they stop hitting us."