Wynn bides its time in Macau

MACAU – Analysts and Macau casino operators see Wynn’s move to scale back on their expansion plans this year as a positive step with continued growth in casino supply, visa restrictions and insufficient labour supply.

“Wynn’s repurchase program is a clear positive, while Wynn also indicated materially better operating results,” a Deutsche Bank report stated.

“However, with respect to the visa issues and new competition, we believe Wynn is exercising caution and judiciously adding supply as needed.”

The Deutsche Bank report also said visa restrictions appear to be having a minimal impact on Macau’s gaming revenues so far, particularly if May unofficial results are accurate at +60 per cent,

“We would expect the new restrictions would impact the lowest end of the mass market and would be less likely to hamper premium customers.

“The official motives behind the restrictions remain uncertain (as well as how long they could last), however, we believe it could be as simple as a dispute over water charges paid to Guangdong province or other reasons such as concerns with Macau’s economy overheating or the social impact of gaming,” the report added.

MGM Grand Macau’s Bob Moon agrees. “Wynn’s [move] appears straight forward. I doubt if anyone really knows the impact of the new visa restrictions in Guangdong province, as they are newly enacted.

“I am a strong advocate of the long-term success of Cotai. As we are only in the conceptual phase of development, we have the opportunity to evaluate the market as we move forward in this process.

“The continued growth in the market bodes well for expansion, and I continue to believe premier properties built to scale on premier locations will thrive.”

A Citigroup report has mixed views, saying a delay in Wynn’s expansion could provide “flexibility in determining the appropriate mix of VIP vs. mass market tables once the impact of visa restrictions and new supply are better understood. However, delay of Macau expansions highlights near-term uncertainty.”

Overall, Citigroup does think Wynn’s approach “makes sense”.

One local Macau analyst who prefers to remain anonymous says Wynn’s move also makes sense. “First of all, with regard to visa restrictions, we are seeing a decrease in bettors across the market. Secondly, there’s lots of supply coming onto the market and finally, they may not be able to get enough labour to finish their expansion on time.”

On June 7, Wynn Resorts Limited announced an equity repurchase program of up to US$1.2 billion which may include purchases of both its common stock and its 6 per cent convertible debentures due in 2015.

The company cited the newly enforced visa requirements from Guangdong province, Beijing and Shanghai as the reason for this decision and the additional casino supply in August and November with the openings of Venetian Macao and MGM Grand Macau.

Wynn Macau now says it will open approximately 25,000 sq. feet of additional gaming space with approximately 25 table games, 200 slots and a restaurant in the third quarter of this year.

This now means that Wynn will increase table count by 10 per cent, instead of nearly doubling it as previously intended. Other areas of expansion will be opened later and the Wynn Diamond Suites Hotel Tower is anticipated to open in early 2010.

Source: Destination Macau http://www.destination-macau.com/