Wynn Macau is Set to Take Market Share Away From Competitors

January 25, 2023 Macau Earnings & Filings

In the upcoming years, Wynn Macau might increase its market share in the Chinese region. Due to the collapse of the junket sector, operators are now competing for a fragmented VIP clientele while premium mass players return to the tables.

The potential for Wynn Macau to steal market share from rivals this year may be underestimated, according to CBRE analyst John DeCree in a letter to clients on Tuesday. Analysts anticipate that the operator will report revenue in 2023 that is 66% lower than what it was in 2019, before the coronavirus pandemic, and EBITDA that is 73% higher than 2019 levels. These numbers fall far short of the 78% revenue and 87% EBITDA comeback projections experts have made for all six Macau concessionaires combined.

According to DeCree, “Wynn historically earns considerably than its fair share in each of the markets in which it operates, including Macau. “Across all metrics in 2019, Wynn outperformed its fair share in Macau.”

Wynn Las Vegas, Encore on the Strip, and Encore Boston Harbor are all operated by parent firm Wynn Resorts (NASDAQ: WYNN), in addition to Wynn Macau and Wynn Palace.

Wynn Macau has a Track Record of Efficiencies
The aforementioned two integrated resorts are run by Wynn Macau in the special administrative zone (SAR). Even if those locations aren’t the biggest on the peninsula, the business has a reputation for maximizing the most of its gaming area and lodging.

The number of slot machines and table games that each casino may provide is capped under Macau’s new gambling regulations. The operator can have control over 9.5% of the hotel rooms and table games in the SAR just for Wynn. Analysts predict that the business will produce 11.5% EBITDA and sales share. Despite being above the allotment, DeCree thinks the estimate is too low.

The analyst continued, “Given the possibly smaller market and lower concentration of VIPs, some operators might not use the entire number of tables they have been allotted. If Wynn can successfully consolidate the highest value client categories and enhance profitability per table and room, as we expect it will, this may lead to Wynn earning an even bigger premium to its fair share.”

While Wynn Macau has historically relied on VIP patrons, DeCree noted that the operator can probably move some of those patrons into the premium mass category going forward, which might be profitable for margins.

Wynn Bullishness is Pervasive
The enthusiasm carried over into 2023, with the stock up 18.84% year-to-date. Shares of Wynn Resorts concluded 2022 on a bright note, registering a tiny yearly loss, which was good for one of the best showings among casino shares.

This increase has been made possible by a wave of bullish commentary from sell-side analysts who are certain that Wynn stock would rise when Macau recovers.

DeCree rates Wynn Resorts as a “buy” with a price objective of $130. That is significantly higher than Wednesday’s closing price of $98.36 and up from $115.