Wynn Resorts (WYNN) delivered a much better-than-expected first quarter on Wednesday, with the casino operator’s properties in Las Vegas and Boston continuing to post impressive results. But what helped the company turn a windfall profit was the takeover of China’s Macau gaming hub, allowing management to reinstate a quarterly dividend of 25 cents a share. Operating revenue rose 49% year-over-year to $1.42 billion, beating analysts’ expectations of $1.37 million, according to estimates compiled by Refinitiv. Adjusted real estate earnings before interest, taxes, depreciation, amortization, and restructuring or lease costs (EBITDAR) — Wynn’s key measure for profitability — soared 141% year-over-year to 429.7 million, beating analysts’ forecasts for an EBITDAR of $373 million. Adjusted earnings per share (EPS) came in at 29 cents per share, ahead of a consensus forecast of 2 cents per share. The days of Wynn losing money are officially over. The company delivered its first profitable quarter since 2019 on Wednesday, after about three years of draconian Covid-19 restrictions in China that weighed heavily on the casino operator. China’s Macau special administrative region accounted for about 75% of Wynn’s total profits before the pandemic. But Macau is now firmly on the road to recovery, while there has been no letting up at Wynn’s Las Vegas and Boston properties. However, the game remains very sensitive to economic developments. We will continue to monitor the impact of the ever-changing macroeconomic environment on Wynn’s business, but for now, it remains clear that the trend of robust consumer spending on travel and experiences is playing directly into the hands of the ‘business. The stock’s reaction to the quarter was muted after hours, with shares up less than 1%. So far, the market is underreacting to what has clearly been a strong quarter, with the added bonus of a surprise capital return for shareholders. Quarterly Commentary Macau The region finally moved to positive EBITDAR after several consecutive quarters of losses caused by Beijing’s Covid restrictions. The quarter appears to be uneven on a property-by-property basis, with the $20 million EBITDAR beat at Wynn Palace partially offset by an $18 million revenue shortfall at Wynn Macao. It seems the failure can be attributed to wealthy players frequenting Wynn Palace at the expense of Wynn Macau, which is historically more exposed to groups and tours. One of Wynn Macao’s casinos was also closed for part of the quarter for renovations. But the bigger story here is how quickly the recovery is taking shape. In casino, the so-called table drop, or total payout, of so-called mass customers reached 82% of first-quarter 2019 levels, with market share levels in line with 2019. Wynn management also noted on Tuesday that the recovery gathered pace in April, amid lingering signs there is an extraordinary amount of pent-up demand waiting to be released by China’s ongoing economic reopening. Wynn just wrapped up a terrific May Golden Week holiday season that topped 2019 in several key areas. Las Vegas Wynn Las Vegas continues to post strong results, generating an all-time high adjusted EBITDAR of $231.6 million. A higher than normal “hold” – the amount of revenue a casino generates from wagering – positively impacted EBITDAR by approximately $4 million. There may be a lot of talk about a decline in consumer spending, but it doesn’t show at the Wynn Las Vegas. Hotel occupancy was 88.8% in the quarter, up 1,190 basis points year-over-year and 620 basis points from the first quarter of 2019. And the property is much more profitable today than it was before the pandemic. On a normalized basis, Wynn Las Vegas’ EBITDAR margins increased 300 bps year over year and 1,400 bps from the first quarter of 2019. The good times in Vegas also continued in April. On Wednesday, management said it had just had the best April in the property’s history. While macroeconomic headwinds remain a concern, CEO Craig Billings said on the company’s post-earnings conference call that “things are going well here,” thanks in part to the group’s strong futures demand pipeline and the room pricing power. Still Boston Harbor Boston ownership sees no signs of slowing down either, with strength on both the gaming and non-gaming side of the business. The casino’s gross gaming revenue of $191 million was a real estate record, and non-gaming revenue was up 21% year-over-year, driven by the hotel and restaurant segments. April is also off to a good start, with management noting that EBITDAR per day is following trends it has seen in recent quarters. Wynn Interactive Wynn continues to take a cost disciplined approach to its digital gaming platform. Its burn rate EBITDAR (the amount of money it lost) declined sequentially and year over year. Capital Allocation It’s been about three years since Wynn Resorts suspended its dividend to preserve cash during the pandemic, but now it’s finally back. The company announced Wednesday that it would resume paying a quarterly dividend, starting at 25 cents per share. That’s a far cry from the quarterly $1-per-share payout Wynn offered before the pandemic, but it’s still an important sign of confidence in the company’s future. Additionally, Wynn has several growth projects underway that will require capital, including the Wynn Al Marjan Island resort in the United Arab Emirates. The cost of the project is estimated at $3.9 billion, but management estimates that the complex will generate between $450 and $600 million in steady-state EBITDAR. Wynn Resorts will hold a 40% interest in the joint venture. Another project that Wynn has capital for is a potential New York project in the Hudson Yards neighborhood of Manhattan. It would be a huge win for Wynn, but it would also be a very competitive bidding process. (Jim Cramer’s Charitable Trust is long WYNN. See here for a full stock list.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. 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People use their smartphones to take photos outside the Wynn Macau casino resort, operated by Wynn Resorts Ltd., in Macau, China, Tuesday, Jan. 30, 2018.
Billy HC Kwok | Bloomberg | Getty Images
Wynn Resorts (WYNN) delivered a much better-than-expected first quarter on Wednesday, with the casino operator’s properties in Las Vegas and Boston continuing to post impressive results. But what helped the company turn a windfall profit was the takeover of China’s Macau gaming hub, allowing management to reinstate a quarterly dividend of 25 cents a share.
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