Research group projects possible 2023 EBITDAR of $917 million for Wynn Macau.
Wynn Resorts' subsidiary in Macau, Wynn Macau, is on track to achieve a much higher earnings before interest, taxes, depreciation, amortization, and rent or restructuring (EBITDAR) of $917 million in 2023, according to a recent analysis by CreditSights. This figure is significantly higher than the earlier estimates of $632 million (base case) and $892 million (bull case). CreditSights credits Wynn's impressive margin improvements as the driving factor behind this improved performance.
Wynn Macau's success is particularly notable given the ongoing recovery in Macau, which has been accelerating since China relaxed its Covid-related travel restrictions in January. As a result, Wynn Resorts, the parent company, is optimistic about its chances of reclaiming its pre-pandemic earnings levels by next year.
One key factor contributing to Wynn Macau's success is its strategy of de-emphasizing VIP gambling in favour of mass and premium-mass markets. This shift is not only more profitable due to lower costs associated with mass-market players, but also allows them to grab a larger share of the market from their competitors.
Moreover, CreditSights predicts that Wynn Macau's business volume will continue to be robust, along with better cost management, as potential growth drivers for the company. In fact, Jefferies analyst Andrew Lee reported recently that summer 2023 travel to Macau from mainland China is on the upswing, with tourists expressing a strong preference for the gaming hub over other popular destinations like Hong Kong and Taiwan. In the first half of 2023, Macau emerged as the most popular overseas destination for Chinese travellers, according to data from China Tourism Academy.
Furthermore, CreditSights notes that Wynn Macau's debt levels may improve, which could be good news for investors holding the company's corporate bonds. Based on current estimates, Wynn Macau's leverage could fall to 7.4x before year-end, implying potential upside for its debt securities. Wynn Resorts itself revealed last week it plans to buy up to $300 million of its $1.78 billion in 5.5% corporate bonds maturing in August 2025.
CreditSights thinks Wynn Macau's bonds are the most attractive investment option among U.S.-based operators in the region, with 5.5% notes due in 2026 yielding 8.2%.
Finally, Wynn Resorts stands to gain even further by curtailing its online sports betting operations in eight states, as announced on Friday. The parent company's healthy financial position, as confirmed in its recent results update, will provide ample resources to support this decision and further enhance its balance sheet.
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Source: www.casino.org
