Wynn Resorts Ltd. (WYNN) reported its fourth-quarter 2010 adjusted earnings of 91 cents per share, handily beating the Zacks Consensus Estimate of 63 cents and well above the year-earlier earnings of 8 cents. On a GAAP basis, net income was $114.2 million or 91 cents per share versus net loss of $5.2 million or 4 cents recorded in the comparable quarter prior year.
The results were boosted by higher-than-expected revenues. Net revenue surged 52.9% year over year to $1,237.2 million outpacing the Zacks Consensus Estimate of $1,114.0 million. The outperformance was primarily attributable to its booming Macau operations.
For full fiscal 2010, adjusted net income attributable to Wynn Resorts was $261.0 million, or $2.11 per diluted share versus 31.7 million, or 26 cents per diluted share recorded in the prior-year quarter. Total revenue increased 37.4% over the year to $4.2 billion.
Macau Operations
Net revenue at Wynn Macau was $912.1 million, up 79.4% year over year, primarily driven by a significant increase in table games turnover in the VIP segment, which rose by a massive 63.7% from the prior-year period to $27.7 billion.
The VIP table games win in the quarter was 3.15% based on turnover, ahead of the expected range of 2.7% to 3.0% and significantly higher than 2.70% recorded in the prior-year quarter.
However, table games in the mass market category expanded 29.5% year over year to $663.3 million. Mass market table games win rate was 26.0%, well above the expected range of 19% to 21% and 22.9% recorded in the year-earlier quarter.
Average daily rate (ADR) at Wynn Macau was $303, up from $271 in the year-ago quarter. Occupancy level rose to 92.3% from 90.6% in the prior-year quarter.
Non-gaming revenues at Wynn Macau shot up 58.6% to $92.6 million from the prior-year quarter, primarily aided by the increase in hotel and retail revenues. These revenues soared 92.7% and 41.8%, respectively, driven by the addition of Encore rooms and the opening of three new boutiques at Encore. Retail revenues benefited from strong same-store sales growth.
Including Encore, Wynn Resorts currently has 479 tables (243 VIP tables, 225 mass market tables and 11 poker tables) and 1,015 slot machines at Wynn Macau.
Las Vegas Operations
Wynn Resorts’ revenue from Las Vegas operations increased 8.0% year over year to $325.1 million. Net casino revenue was $139.2 million, up 16.0% from the prior-year period. Gross non-casino revenues upped 2.6% year over year to $230.9 million, primarily on increased revenues from nightclub operations and the newly opened Surrender.
Reflecting continued challenging conditions in Las Vegas, Wynn reported a drop in room revenues, which were down 1.7% year over year at $76.4 million despite the rise in ADR and occupancy.
The decrease in revenue was credited to the 9.0% fewer room nights available for sale during the quarter due to the remodelling of the rooms at Wynn Las Vegas. This room remodeling is expected to be completed in the second quarter of 2011. ADR at Las Vegas registered a 7.1% increase to reach $235, while occupancy level grew modestly to 81.8% from the year-ago level of 81.0%.
Balance Sheet
Exiting the quarter, Wynn Resorts’ total cash balances were $1.3 billion. Total debt outstanding was $3.3 billion, including approximately $2.6 billion of the Wynn Las Vegas debt and $651 million of the Wynn Macau debt.
Our Take
We remain optimistic on the company based on its improving fundamental growth prospects. Wynn Macau’s contribution to the company’s earnings has increased significantly in the last few years. Wynn Resorts’ close competitors Las Vegas Sands Corp. (LVS) alsorecently reported its fourth-quarter earnings. Las Vegas’s fourth-quarter 2010 earnings of 42 cents per share were ahead of the Zacks Consensus Estimate of 38 cents.
Both companies’ results reflect strong performance at Macau business. Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well. Gaming-friendly policies of the local government have facilitated the industry to achieve record earnings in the city.
We expect Asian operations to significantly support the earnings of gaming companies in the coming quarters. Additionally, with global economy showing a gradual recovery, Las Vegas businesses are also rebounding slowly.
Wynn Resortscurrently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Outperform recommendation on the stock.
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