Wynn stocks plummet after earnings call
When Macau renews its gaming concessions starting in 2020, U.S.-based casino companies will be evaluated on performance, and should feel little impact due to trade war tensions between the United States and China.
So says Brett Arbarbanel, gaming researcher at the University of Nevada Las Vegas. “I think we’ll see perhaps a little bit more scrutiny toward the renewal of the gaming concessions,” Arbarbanel told the Macau News Agency. “But I think they’ll focus more on the operational aspect than necessarily using them as pawns for a political debate.”
Risk consultancy Steve Vickers & Associates takes a different position. In a new report, the firm said tensions between the two governments could matter a lot to U.S. operators in the gaming hub: Wynn Resorts, Sands China and MGM China.
“These gaming businesses have profited mightily since 2001, soaking up funds gambled away by Mainland Chinese visitors,” the report states. “Now, though, the Chinese leadership has cause to ask whether to allow American companies such a boon, particularly given the strong and very visible ties between one or two of the gaming tycoons and President Trump.”
Sheldon Adelson, head of Sands China parent the Las Vegas Sands Corp., is a Trump intimate. Wynn Resorts founder Steve Wynn also has longstanding ties to the U.S. president and onetime gaming operator, but he may no longer be a determinant. The former Wynn Resorts chairman and CEO resigned in February amid sexual harassment allegations, and his departure could be viewed as a plus, said UNLV’s Arbarbanel. “I would be surprised if we don’t see something surrounding how the company is now operating in his absence and how that might come into play for the renewal concessions,” she said.
Asia Gaming Brief reports that there are indicators that Trump and Chinese President Xi Jinping will announce a truce at a meeting later this month. But many Washington politicians could continue to see China as an adversary, said the Vickers report; the dispute could take a bite out of casino shares. For example, Wynn Resorts shares fell 15 percent last Thursday after CEO Matt Maddox said casino operator is seeing a post-Golden Week “slowdown” in Macau, especially among high rollers.
“We’ve seen it in particular in the premium end of the business: premium mass, premium slots and VIP,” Maddox said during the company’s November 7 earnings call. “What we’ve always focused on in our business is the premium end, and we always will. In Macau, while that will be the first to retract in these times, it’s also the first to expand as you come out of these slowdowns.”
According to CNBC.com, Maddox sent the wrong message in the call when he noted a deceleration in the premium market globally, including in Singapore and Las Vegas. In a note, Nomura analyst Harry Curtis wrote, “Wynn’s messaging was negative, which sent the shares down 10 percent in a heartbeat.
“Management tried to explain the worse-than-expected trend as a loss of confidence especially among premium players,” Curtis added. “We agree, but believe that some historic perspective should have been provided: that in markets with slowing economies, players keep visiting casinos and their ability to wager may not be impaired, but their spend/bet declines.”
Wynn Macau Ltd. and Sands China Ltd. will be the last U.S. operators to have their concessions considered for renewal, in 2022; MGM China’s concession will expire in 2020.
