Tags: Wynn | Resorts | china | WYNN

Wynn Resorts: A Gamble on China Growth

By    |   Thursday, 17 Nov 2011 12:59 AM

Wynn Resorts (WYNN) sports a famous Las Vegas name, but the current money in the gambling industry is not being made in Vegas. The profits and growth come from the Far East, where Wynn gives investors a chance to take a gamble on China growth.

Wynn Resorts owns the two gambling and resort properties, Wynn Las Vegas and Wynn Macau. Wynn Las Vegas has 4,750 hotel rooms, 35 restaurants, high end retail space, two spas, convention facilities and a 180,000 square foot casino. Wynn Macau has 600 rooms, 5 restaurants, retail shopping and a 200,000 square foot casino.

Casino operations account for about 75 percent of total company revenues. In the current economic and gaming environment, Wynn Macau is bringing in approximately 75 percent of the gaming company’s EBIDTA.

For the 2011 third quarter Wynn Resorts reported revenue of $1.3 billion, up from $1 billion. Adjusted net income for the quarter was $1.05 per share, more double the 39 cents per share earned in the same quarter of 2010. The big earnings gain was the result of the Macau results. The China casino saw revenues increase 40 percent year-over-year and EBITDA grew by 50 percent.

Growth rates vs. expectations

For Wynn Resorts, the Las Vegas operations currently are a nearly break-even proposition. Until the U.S. economy starts to turn upward and the Nevada gaming results start to improve, there is little chance for growth from this part of the company. The Macau operations are drawing from growth in the Chinese economy and the improved financial standings of many Chinese. The results have been 40 percent year-over-year revenue and profit growth.

The stock market has high expectations of that growth and has priced WYNN accordingly. When the $1.05 third quarter earnings significantly missed the $1.18 consensus estimate, the share price tumbled by 30 percent before recovering about half of the drop-off. Investors must find a way to evaluate the accuracy of projected future earnings.

Recently the analysts at BMO Capital Markets upgraded WYNN to market outperform from market perform.

The company reports next on Jan. 18.

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Wynn Resorts (WYNN) sports a famous Las Vegas name, but the current money in the gambling industry is not being made in Vegas. The profits and growth come from the Far East, where Wynn gives investors a chance to take a gamble on China growth. Wynn Resorts owns the two...
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Thursday, 17 Nov 2011 12:59 AM
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