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Best of Howard Stutz

Gaming Guru

Howard Stutz

Wynn stock drops 11 percent

28 October 2009

LAS VEGAS, Nevada -- Wynn Resorts Ltd. said its net income declined 33 percent in the third quarter, causing the company's stock price to fall 11 percent Tuesday.

But you couldn't tell that from the reaction of company Chairman Steve Wynn.

After opening the $2.3 billion Encore at Wynn Las Vegas last December in the middle of a recession, he was expecting a horrible 2009.

Not anymore.

"If things continue the way they are, we're going to equal or beat 2008 in Las Vegas and we're going to equal or beat last year in Macau," Wynn said on a conference call with analysts. "It isn't as bad as we thought it might have been."

The Las Vegas-based company, which operates casinos in Las Vegas and Macau, earned $34.2 million, or 28 cents a share, in the quarter that ended Sept. 30, down from earnings of $51.2 million, or 49 cents a share, a year earlier. Analysts polled by FactSet Research expected Wynn to earn 16 cents a share.

Revenue for the quarter came in at $773.1 million, up 0.5 percent from $769.2 million in the third quarter of 2008, due mainly to the Encore opening.

"Overall, it was a very good quarter for Wynn," Susquehanna Financial Group gaming analyst Robert LaFleur told investors. "Results in Macau were not surprising given the positive data points we have seen over the past few months. However, results in Las Vegas were much better than expectations."

In Las Vegas, casino revenue was $144 million, flat when compared with the 2008 third quarter. Noncasino revenue rose almost 18 percent because of Encore.

The company's average daily room rate fell to $210 from $272 while occupancy fell to 83.9 percent from 96.1 percent.

At the Wynn Macau, revenue fell to $448.5 million from $474.8 million.

Shares of Wynn Las Vegas closed down $6.94 at $56.13 on the Nasdaq National Market on Tuesday.

"Wynn reported a solid quarter in both Las Vegas and Macau, although note that we have lowered our estimates dramatically over the past year," Goldman Sachs gaming analyst Steven Kent told investors. "In Las Vegas, gaming revenues came in better than we expected."

The company raised $1.63 billion through an initial public offering this month on the Hong Kong Stock Exchange. Wynn hinted that the proceeds might be used for investment in Asia, including a new resort on Macau's Cotai Strip.

The company expects to open the $675 million Encore at Wynn Macau in April, which is being paid for through cash flow.

"We're working on the project in Cotai, but until we're finished with the changes and are satisfied, we won't discuss it or show it," Wynn said.

On the conference call, Wynn spent about five minutes discussing his recent signing of entertainer Garth Brooks to a long-term contract to perform at the showroom inside Encore.

Wynn said the signing will affect the company's corporate expenses -- the cost of buying Brooks a private jet to fly him between Las Vegas and his home in Tulsa, Okla., and his contract. But that money will be made up from the revenues that surround Brooks' concerts.

Tickets for the first 20 shows sold out in five hours last weekend, and Brooks will perform during the National Finals Rodeo weekend in December.

"This event will have a tremendous impact on our company in a positive way," Wynn said. "He is a crossover artist of enormous popularity. Garth Brooks is a category breaker."

In an interview after the conference call, Wynn said the company will spend about $65 million to change the front entrance at Encore to become the Beach Club, which will include a new nightclub called Surrender. The back wall at Switch Restaurant will be all glass so patrons can look out onto a terrace.

Wynn stock drops 11 percent is republished from