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Analysts: Legislation Could Delay Wynn Macau Project

8 August 2003

by Richard N. Velotta

MACAU -- Gaming analysts say legislation outlining gaming tax policy in Macau may be delayed from next week until fall, which could push back the groundbreaking and opening of Steve Wynn's casino there.

Wynn, working on the Wynn Macau property plans while in Sun Valley, Idaho, Thursday, said he isn't worried, realizing that lawmakers are receiving volumes of new information and are learning a number of tax complexities they've never seen before.

"It's a little slow because it involves a lot of change," Wynn said. "Many of the concepts are new and have to be thoroughly explained."

Wynn explained that write-off concepts and how complimentary services are treated in tax laws are among the areas being reviewed by the Macau Legislature.

Executives of Las Vegas Sands Inc., which also is building casino properties in the Chinese resort city of Macau, made reference to the legislative delay in an earnings conference call earlier in the week. Sands officials indicated a delay would not be a problem for the company's two Macau projects.

Macau lawmakers had indicated months ago that they wouldn't complete gaming tax legislation until the end of 2003, but Wynn investors were hopeful it would be passed before fall so that Wynn could break ground on schedule and open the property before the $2.4 billion Wynn Las Vegas property opened.

Wynn Las Vegas, formerly known as Le Reve, is under construction at the site of the former Desert Inn hotel-casino and is expected to open in April 2005.

In reports issued Thursday, two analysts suggested that the passage of legislation may be delayed until after October, resulting in some investors growing impatient with Wynn Resorts Ltd. stock prices.

Marc Falcone of Deutsche Bank Securities Inc., New York, said there's a good chance gaming tax legislation wouldn't be passed by the Macau Legislature's Aug. 15 recess.

"Our current projections, which were based on the legislation passing by the Aug. 15 recess, assume a third-quarter groundbreaking," Falcone said in his report. "If it doesn't pass until the Legislature reconvenes in October, groundbreaking will likely slip into the fourth quarter or the first quarter 2004. Depending on the final scope of the project ... and assuming construction can't be accelerated, this would push the opening date out beyond our present first-quarter 2005 assumption. Unfortunately, this would push Macau's opening date to sometime after the opening date of the Las Vegas property."

Although a delay is likely, Falcone and analyst Harry Curtis of J.P. Morgan Securities Inc., New York, said it will be worth the wait for investors.

"Patience with Macau should be worth it in our view," Curtis said in his report. "The size of the local gaming market is growing significantly as China relaxes travel restrictions to Hong Kong and Macau from other Chinese cities such as Shanghai and Beijing. When we initiated coverage on shares of (Wynn Resorts) in December 2002, we estimated gaming revenues of $2 billion, which we believe now exceed $3 billion. We continue to forecast growth to more than $4 billion."

Falcone's report also said that while investors may find a legislative delay disappointing, the Wynn project will remain on track and the company has hired a longtime Australian gaming executive to serve as president and general manager of the Wynn Macau property.

Grant Bowie, who served as senior vice president of BI Gaming Corp. and as general manager of Conrad Jupiters in Australia, was appointed to the Wynn post earlier this week. Bowie has been in the gaming industry for 20 years.

"Bowie's hiring is a clear indication that the Wynn Macau project is moving forward, the present legislative delays notwithstanding," Falcone said.

Wynn Resorts stock was down 21 cents to $15.82 a share this morning from Thursday's closing price.

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