MGM, Galaxy, Sands and SJM all down
Wynn Macau’s 45 percent earnings drop in first-quarter 2015 has Steve Wynn calling on lawmakers in Macau to “calm that down and put some certainty back into the picture.”
The Chinese unit of Las Vegas-based gaming giant Wynn Resorts reported adjusted earnings of $212.3 million during the first quarter, a plunge of 45 percent. Wynn Macau saw a 38 percent revenue decline to $705.4 million. VIP table revenues dropped more than 50 percent during the period, and mass-market table revenues were down 7 percent.
In the aftermath, Wynn share values fell 7.6 percent on the Hong Kong exchange, reported Bloomberg News. The bad news was widespread: MGM China Holdings Ltd. was down 2.7 percent; Galaxy Entertainment Group and SJM Holdings Ltd. both fell about 2 percent; and Sands China Ltd. dropped 0.6 percent. The Hang Seng Index lost 0.2 percent, Bloomberg reported.
As a result, Wynn Resorts is cutting dividends to 50 cents a share, one-third of the $1.50 it paid in February (and well under the $2.50 dividend it paid out last October). Wynn said the board “would not hesitate to continue to reduce the dividend” in the future.
The billionaire is seeking some reassurance from the government as he prepares to open a second Macau property in early 2016. Like others in the market, he is concerned about the number of gaming tables he will get for the $4 billion Wynn Palace. He is also concerned about allocations of workers to complete it.
“We’ve struggled with adjusting our work schedule on construction to the permissions we’ve been given for workers by the government,” said Wynn. In addition, he says Macau’s decision to limit the number of visitors to the gaming enclave “leaves us in a bit of a quandary.”
“We never know quite what to expect these days,” Wynn complained.
In a note to investors, JP Morgan Chase analyst DS Kim wrote that Wynn Resorts’ “earnings power proved to be underwhelming versus the most expected, which was disappointing given its market share gain during the quarter.” The Las Vegas Review-Journal said the Macau unit has long been “the cash cow” for Wynn Resorts. But this time around, the 37.7 percent net revenue decrease from Macau operations were partially offset by a 1.6 percent increase in net revenues from Las Vegas operations.
In the earnings call, Wynn also criticized the government for delays to new infrastructure in the city, including the light rail transit system.
Wynn added that it would be next to impossible to scale back the Cotai project at this point. “You can’t slow it down. It’s being finished and there are bank obligations. You can’t slow it down in Macau. The building is sitting there. The skin is on. They’re getting ready to fill the lake. Staff is hired.”
He added, however, “I don’t suspect that we’re going to lose money in Macau… I don’t want you to infer that.”
Amid all the speculation about the city’s future, Macau’s Secretary for Economy and Finance Lionel Leong says the government may implement “an austerity plan” if monthly gaming revenues drop to less than MOP18 billion (US$2.25 billion), according to the Macau Daily Times.“Cash handouts depend on the MSAR’s financial situation,” Leong said.
And speaking of billionaires, Bloomberg reports that China’s three richest casino moguls have lost a combined $22 billion in the past year. They include U.S. operators Wynn and Sheldon Adelson of the Las Vegas Sands Corp., and Lui Chee Woo, the Chinese owner of Galaxy Entertainment Group Ltd.
