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Inside gaming column: Wynn dips, but analysts saw it coming

18 February 2008

LAS VEGAS, Nevada -- The one-day drop of nearly $9 per share in the value of Wynn Resorts Ltd., less than 24 hours after the company reported earnings, was expected, according to Wall Street analysts.

Shares of the Las Vegas-based casino operator, traded on the Nasdaq National Market, continued to fall on Thursday. By the end of the week, shares closed at $104.62, off $15.22 from Tuesday's close of $119.84.

Gaming analysts said the company, which operates Wynn Las Vegas, is building the $2.2 billion Encore and owns Wynn Macau, had mixed performance in the quarter that ended Dec. 31.

"Investors were looking for lofty results out of Macau due to monthly gaming figures which were indicating Wynn Macau was increasing market share," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said in a note to investors.

"Management was cautious on the outlook for Las Vegas," he said. "While they have not seen a slowdown up to this point, management stated Las Vegas is not totally immune to an economic downturn."

Oppenheimer gaming analyst David Katz predicted Wynn's stock price would drop.

"With a strong Macau and flattish Las Vegas, we view the quarter as somewhat mixed, which should reverse some of the recent gains in the stock," Katz wrote in a note to investors. "We maintain our view that, on balance, the risks of oncoming supply in Macau and Las Vegas and the prospective opportunities in Las Vegas and Cotai are priced into the shares."

Almost two full years remain before the Chinese government installs a new chief executive to administer the Special Administrative Region of Macau.

The impending changeover interests casinos companies, investors and Wall Street. Speculation abounds about whether the new executive will grant additional casino licenses after 2009.

Las Vegas Sands Corp. Chairman Sheldon Adelson isn't convinced more licenses are necessary. He wouldn't mind seeing some vanish.

"When we talk to the Chinese government, they indicate to us that they feel there have been too many licenses out there," Adelson said during his company's recent quarterly earnings conference call. "The good news is that there doesn't seem to be anything on the horizon between now and then to open. So we're going to make every effort to see that they don't, that this doesn't expand at all."

Six operators now have agreements to run casinos in Macau -- Hong Kong billionaire Stanley Ho; Melco PBL, partly owned by Ho's son Lawrence Ho; Galaxy of Hong Kong; Las Vegas Sands; Wynn Resorts; and MGM Mirage in partnership with Stanley Ho's daughter, Pansy Ho.

The Inside Gaming column is compiled by Review-Journal gaming and tourism writers Howard Stutz, Benjamin Spillman and Arnold M. Knightly.

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