Plans to shift 250 from Wynn Macau
Last year, billionaire casino magnate Steve Wynn blasted the Macau government for keeping him in the dark about the gaming table allotment for his new $4.2 billion Wynn Palace, scheduled to open this month on the Cotai Strip.
Now Wynn, who called the uncertainty “outrageous,” “ridiculous” and “preposterous,” has learned he is likely to receive only 100 new-to-market tables at the plush new resort, which was built to house as many as five times that.
The table count is short of the allotment granted to his neighbors on Cotai: Galaxy Entertainment was granted 150 new tables when it opened its Galaxy Macau Phase II casino last May. And Melco Crown Entertainment was awarded 200 new tables when it opened in October. Both had hoped for 400 tables; both were permitted to add more in the months after they opened.
In a second-quarter results announcement, released on July 31, Wynn said it expects a similar outcome, “with additional table games allocated to us post-opening.” If it gets 100 tables, the firm added, it will move 250 tables from Wynn Macau to Wynn Palace, which would put the majority—350 table games—at the new resort, and leave 270 at Wynn Macau.
This time around, Chairman Steve Wynn kept his vitriol to himself, saying on the earnings call that the firm can operate “efficiently and profitably” with just 100 new-to-market gaming tables by focusing on the premium mass casino segment.
“We established a long time ago various scenarios where we can operate from 100 tables to 280 tables,” Wynn said. “By having fewer tables, you get to have higher utilization,” he added.
Morgan Stanley analysts said they were “negatively surprised” by the meager allotment. “Even though Wynn claimed that only one-third of VIP tables at Wynn Macau are profitable, shifting 250 tables from peninsula will cannibalize EBITDA meaningfully in our view. We hope it will receive another 150 new tables after the opening, without which we see meaningful cuts in EBITDA estimates.”
The Sanford C. Bernstein team agreed. “While Wynn tried to put a not-so-negative spin on the table allocation, we view the initial number of 100 as disappointing.”
Wells Fargo Securities LLC analyst Cameron McKnight took a different view. “On the surface, investors are likely to be disappointed by the allocation of 100 new tables to the Wynn Palace,” he said. “While this is below consensus expectations of 200 tables, we believe 100 new tables can be yielded far more aggressively than 200 tables at the new property.”
However, McKnight conceded, “The lower table allocation likely reflects the tough political environment in Macau.”
“The number of allocated tables to Wynn Palace is very disappointing,” said Jamie Soo of Daiwa Capital Markets Hong Kong Ltd. “The reductions in bets indicates the continuous weak demand in the market, and the real recovery sign for Wynn and the gaming market in Macau has yet to be seen.”
Macau’s gaming industry took a dive in the summer of 2014, when Chinese President Xi Jinping announced a crackdown on corruption that caused high rollers to spend less or spend elsewhere. The city has yet to recover, despite an ongoing building boom on Cotai; the $2.7 billion Parisian Macao, a Sands China property, is slated to open in September, followed by the $2.5 billion MGM Cotai in January.
Bloomberg News reported that Wynn shares fell 8 percent in early trading after the news, but ended the day up 2.4 percent, and are up 51 percent for the year.
