Published on: January 18, 2023, 03:59 am.
Last updated: January 18, 2023, 03:59.
Wynn Macau could gain market share in the Chinese territory in the coming years as premium table players return to the tables and as operators compete for what is now a fragmented VIP demographic due to the demise of the junket industry.
In a note to clients on Tuesday, CBRE analyst John DeCree said industry analysts may be underestimating Wynn Macau’s potential to steal market share from rivals this year. Analysts expect the operator to post revenues in 2023 that are 66% of what was seen in 2019, before the coronavirus pandemic, and earnings before interest, taxes, depreciation and amortization (EBITDA) that are 73% of levels of 2019. These numbers are well below the 78% revenue and 87% EBITDA that analysts are modeling for the six Macau concessionaires combined.
Historically, Wynn earns far more than its fair share in each of the markets in which it operates, including Macau,” according to DeCree. “In 2019, Wynn exceeded its fair share in Macau by every measure.”
In addition to Wynn Macau and Wynn Palace, parent company Wynn Resorts (NASDAQ:WYNN) operates Wynn Las Vegas and Encore on the Strip and Encore Boston Harbor.
Wynn Macau has a track record of efficiency
Wynn Macau operates the aforementioned pair of integrated resorts in the special administrative region (SAR), and while those locations aren’t the largest on the peninsula, the company has an established track record of making the most of its gaming space and guest rooms .
Under Macau’s new gambling laws, there are limits on how many slot machines and table games each casino can offer. Specific to Wynn, the operator can control 9.5% of SAR’s hotel rooms and table games, with analysts expecting the company to generate 11.5% EBITDA and revenue share. While this is a premium for the allocation, DeCree considers the estimate too conservative.
“Given the potentially smaller market and much less VIP concentration, some operators may not use all their allocated table capacity. This could lead Wynn to earn an even greater premium to its fair share if it can successfully consolidate its highest-value customer segments and maximize table and room profitability, as we suspect it will,” he added the analyst.
He pointed out that while Wynn Macau has a history of trusting VIP customers, the operator may likely mix some of those customers into the premium dining pool in the future, which could increase margins.
Bullishness Wynn abounds
Shares of Wynn Resorts ended 2022 on a strong note, posting a modest year-to-date loss, which was good for one of the best-performing casino stocks. The momentum has continued into 2023, with the stock up 18.84% year to date.
That rise was helped by a number of bullish comments from sell-side analysts, with the belief that as Macau recovers, there could be an upside to Wynn shares.
For its part, DeCree rates Wynn Resorts “buy” with a price target of $130. That’s up from $115 and well above today’s closing print of $98.36.