Wynn Resorts Limited (WYNN) reported third quarter 2010 adjusted earnings of 39 cents per share, below the Zacks Consensus Estimate of 41 cents, but above the year-ago quarter earnings of 33 cents. On a GAAP basis, net loss was $33.5 million or 27 cents per share versus a net income of $34.2 million or 28 cents recorded in the comparable quarter last year.
Results were boosted by higher-than-expected revenues. Net revenues surged 30.1% year over year to $1005.9 million, outpacing the Zacks Consensus Estimate of $999.0 million. The outperformance was driven by solid results at its Macau operations.
Macau Operations
Net revenues at Wynn Macau were $671.4 million, up 49.7% year over year, primarily driven by a significant increase in table games turnover in the VIP segment, which rose 53.9% from the prior-year quarter to $21.7 billion.
The VIP table games win in the quarter was 2.88%, based on turnover, above the expected range of 2.7% to 3.0% and significantly higher than 2.84% experienced in the prior-year quarter.
However, table games in the mass market category nudged up 20.6% year over year to $605.1 million. Mass market table games win rate was 22.8%, above the expected range of 19% to 21% as well as 20.8% recorded in the year-earlier quarter.
Average daily rate (ADR) at Wynn Macau was $287, up from $263 in the year-ago quarter. However, occupancy level declined to 87.6% from 89.2% in the prior-year quarter, as Wynn added 414 rooms and villas in Macau with the opening of Encore in April end, leading to a modest 7.0% rise in revenue per available room (RevPAR) to $251.
Non-gaming revenues at Wynn Macau shot up 66.0% to $77.5 million from the prior-year quarter, primarily aided by the increase in hotel and retail revenues. These revenues went up 81.3% and 69.4%, respectively, driven by the addition of the Encore rooms and the opening of three new retail outlets.
Including Encore, currently, Wynn Resorts has 461 tables (233 VIP tables, 217 mass market tables and 11 poker tables) and 1,130 slot machines at Wynn Macau.
Wynn Macau’s contribution to the company’s earnings has increased significantly in the last few years. Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well.
The board of directors of Wynn Macau has also approved a special dividend of HK$0.76 per share. In addition, the company will pay recurring dividend with a target yield of 1%–3% annually.
Las Vegas Operations
Wynn Resorts’ revenues from Las Vegas operations increased marginally by 3.1% to $334.5 million. Net casino revenues were $138.4 million, down 3.9% from the prior-year quarter as both table games and slot machines declined. However, gross non-casino revenues hiked 6.3% year over year to $239.4 million, primarily aided by increased revenues from nightclub operations and the recently opened Beach Club.
Reflecting persistently challenged conditions in Las Vegas and remodeling of some rooms, Wynn reported a drop in room revenues, which were down 1.7% year over year to $75.6 million. This was on account of a flat average daily room rate (ADR) of $210, while occupancy level registered a modest growth of 87.8% from the year-ago level of 83.9%.
Balance Sheet
Exiting the quarter, Wynn Resorts’ total cash balances were $1.9 billion. Total debt outstanding was $3.2 billion, including approximately $2.6 billion of Wynn Las Vegas debt and $522 million of Wynn Macau debt.
The company has also announced a cash dividend of $8 per share, payable on December 7, 2010, to shareholders of record on November 23, 2010.
Our Take
We remain optimistic on the company based on its improving fundamental growth prospects and expansion strategy in Macau. We expect this expansion to significantly add to Wynn Resorts’ top line, going forward. Additionally, with global economy showing a gradual recovery, the company is experiencing an increase in demand. Its Las Vegas business, which was the worst hit at the time of the slowdown, is also rebounding, although at a slow rate. Hence, we expect estimates to move up in the coming days.
Wynn Resorts’ close competitor Las Vegas Sands Corp. (LVS) reported its third quarter 2010 adjusted earnings of 34 cents, beating the Zacks Consensus Estimate of 23 cents and 3 cents in the year-earlier quarter. The company’s results reflect a strong performance at its Macau business as well as outstanding results at its new resort in Singapore. Another competitor of Wynn Resorts, MGM Resorts International (MGM) is slated to release its third quarter earnings on November 3, 2010.
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