Wynn Resorts Summer EBITDA, Revenue Expected to be Lower on Macau VIP Weakness, Major Corporate Restructuring Unveiled

Posted on: September 12, 2019, 04:00h. 

Last updated on: September 12, 2019, 03:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts, Ltd. (NASDAQ:WYNN) could experience big declines in third-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA), due in part to weakness in Macau and a lower-than-expected table games win percentage in Las Vegas. The company operates two casinos in each of those markets.

Wynn Resorts offered up grim guidance for its Q3 outlook, due in part to weakness in Macau. (Image: Yahoo News)

Wynn forecast total operating revenue of $1.01 billion to $1.12 billion for the two months ended Aug. 31, down from $1.15 billion for the year earlier period. The operator of the Wynn Palace and Wynn Macau said it expects adjusted property EBITDA for the July and August 2019 period of $225 million to $248 million, well below the $339.4 million reported for the same time frame last year.

The third-largest domestic gaming company by market value said its table games win percentage for the months of July and August hampered adjusted property EBITDA to the tune of $30 million to $35 million, compared with a positive impact of $4 million in equivalent period last year.

Recently, some analysts have said US/China trade tensions — coupled with the long-running pro-democracy protests in Hong Kong — likely pressured gross gaming revenue in Macau in recent months.

Consistent with the broader Macau market, we anticipate our Macau Operations’ casino revenues and Adjusted Property EBITDA for the third quarter of 2019 will be negatively impacted by significantly lower VIP gaming turnover resulting from a variety of factors in the region, including the ongoing trade dispute between the U.S. and China and disruptions in Hong Kong SAR,” a Wynn filing with the Securities and Exchange Commission (SEC) noted.

The Las Vegas-based company derived 70 percent of its second-quarter revenue from the Chinese territory, which is the world’s richest gaming center.

More Disappointment

Low VIP hold in Macau in July and August was one of the reasons for Wynn’s bleak profit and revenue update.

“In addition, while total VIP win as a percentage of turnover was within our expected range of 2.7% to 3.0% for the two months ended August 31, 2019, unusually low hold in our direct VIP operations negatively impacted EBITDA during the period,” the company stated in the SEC filing. “We expect VIP gaming results to be partially offset by continued growth in mass market table drop and slot handle.”

Sin City sentiment was similarly glum for the operator of the namesake Wynn and Encore on the Strip, but the company forecast a modest year-over-year increase in its home market thanks to higher hotel revenue.

“We anticipate our Las Vegas Operations’ casino revenues and Adjusted Property EBITDA, excluding certain leased retail space directly owned by Wynn Resorts, for the third quarter of 2019 will be negatively impacted by our table games win percentage, which is significantly lower than our expected range of 22% to 26% during the first two months of the third quarter of 2019,” said the company.

Corporate Reshuffling

In addition to the dismal guidance, Wynn also unveiled a significant corporate restructuring. An entity known as Wynn Resorts Finance, LLC (WRF), formerly known as Wynn America, LLC, will hold all of Wynn Resorts’ ownership in a limited liability corporation, Wynn Las Vegas, that controls the namesake integrated resort there.

WRF will also control stakes in Wynn Asia and the company’s Massachusetts entity, including the new Encore Boston Harbor property.

Wynn Resorts remains the ultimate parent company, but liabilities are being shifted from that corporation to WRF, which subsequently issued $2.6 billion in new debt. Some of those proceeds could be used for previously announced Macau renovations and other Asia-Pacific efforts.

Moody’s Investors Services assigned a Ba3 rating with a “positive” outlook to the newly issued WRF debt.

“The Ba3 rating assigned to WRF reflects the continuation of Moody’s taking a consolidated approach to Wynn ratings, despite the changes in the organization and financing structure,” said Moody’s Vice President Keith Foley in a note.

The ratings agency said the reshuffling is a positive for Wynn because it “will reduce the organizational complexity by streamlining and simplifying Wynn’s corporate and financing structure.”