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Wynn levels criticism at Macau for table game allocation

16 October 2015

The love affair between Steve Wynn and Macau is on the rocks.

The chairman and CEO of Wynn Resorts Ltd., expressed frustration Thursday that he does not yet know how many table games the Macau government will allocate the $4 billion Wynn Palace, which is expected open on March 25. The property is set up for 500 gaming tables. However, Macau gaming authorities have reduced allocations to newer casinos.

Wynn's frustration boiled over during an hourlong conference call to discuss the company's third quarter results. He called the table game allocation policies "outrageous and ridiculous" and a bad policy that makes planning for the casino's opening a "mystical process."

Wynn said the property is not sure how many dealers and casino floor personnel to hire and train because the government has not told the company the number of table games that will be allowed.

Wynn said the new resort of the Cotai Strip region has $3.5 billion worth of nongaming amenities and a casino that cost $400 million. However, the casino revenue, he said, drives the business.

""The reason these extraordinary nongaming attractions exist is because the damn casino is the cash register," Wynn said with marked exasperation. The 73-year-old billionaire's raised his voice several times during the call.

"We're telling people to come to Macau, but they can't gamble." Wynn said.

He called the Macau policy of allocating table games "the most ludicrous decision that I've seen in my 45 years of experience."

Macau's cratering gaming market, which has seen 16 straight months of declining gaming revenue, took down Wynn Resorts in the third quarter. The company said its net income and revenue declined primarily due to a 37.9 decrease in revenue from the company's two Macau casinos.

Macau gaming revenue overall are down 36 percent through September, due primarily to Chinese government crackdown on corruption that ensnared operators of high junket businesses that are tasked with bringing big spending customers to Macau casinos. Wynn said the fall-off in high-end baccarat play in Macau affects the company's high-end business at its two Strip resorts.

At the conference call's conclusion, Wynn said the quarter wasn't the company's most satisfying three-month period, but his remarks were "candid" and "honest."

Overall, Wynn Resorts said its net income of $73.8 million for the quarter that ended Sept. 30, translated into earnings per share of 73 cents. In the same quarter a year ago, the company's net income was $191.4 million, or $1.88 per share.

Overall revenue of $996.3 million was down from $1.37 billion a year ago. In Las Vegas, net revenue declined 3.9 percent.

The company said it still planned to pay a 50 cents per share dividend to stockholders on Nov. 24.

In addition, the company announced that former Southern Nevada Water Authority chief and current Nevada Gaming Commission member Pat Mulroy was appointed to the Wynn Resorts board of directors. Also appointed to the board was Clark T. "Sandy" Randt, Jr., a former U.S. ambassador to China.

Mulroy resigned her position on the Gaming Commission in a letter to Gov. Brian Sandoval Thursday morning, but she did not say she was joining Wynn's board. Her appointment gives the company's board a female member. Former Wynn board member Elaine Wynn complained about the panel being all-male during her unsuccessful proxy fight in April.

Wall Street had low expectations going into the announcement.

Wells Fargo Securities gaming analyst Dennis Farrell Jr. said ahead of the earnings Macau's 16 straight months of revenue declines, fueled by diminished baccarat play. A 26 percent decline in baccarat volume in Las Vegas in July and August, has also shook investor confidence.

"In a nutshell, the pull-back in high-end baccarat drop has and likely will continue to weigh on Wynn results in both Macau and the U.S. for the foreseeable future," Farrell said.

Wynn announced earnings after the markets closed. Shares of Wynn, which has been as low as $51 a few weeks ago, closed at $73.78 on the Nasdaq, up $1.41 or 1.95 percent.