Published on: October 10, 2024, 04:05h.
Last modified on: October 10, 2024, 04:05h.
Wynn Resorts’ (NASDAQ: WYNN) integrated resort in the United Arab Emirates (UAE) is set to benefit from favorable demographics and a tax-friendly environment, according to JPMorgan analysts.
In a recent report, analysts led by Joseph Greff highlighted that Wynn Al Marjan Island in Ras Al Khaimah (RAK) has access to a lucrative customer base. Positioned just a 50-minute drive from Dubai International Airport, the casino hotel is within an eight-hour flight reach for 96% of the world’s population. Greff and his team identified the core target markets.
Core target markets constitute approximately 25% of the world’s population, 20% of global GDP, and almost 20% of the world’s millionaires,” stated the JPMorgan analysts.
The upcoming Wynn venue, the first regulated casino hotel in the Arab world, is currently under construction and is anticipated to open in early 2027. With its ample oil wealth and increasing number of ultra-high-net-worth individuals, coupled with Dubai’s reputation as a luxury destination, the demographics play a crucial role in the success of Wynn Al Marjan Island.
UAE Regulatory Environment Supports Wynn Casino
At the investor event, Wynn disclosed that the budget for the UAE project has increased to $5.1 billion, with an estimated capital contribution of $1.1 billion. Looking ahead, the operator foresees the UAE casino hotel generating adjusted property EBITDA of $390 million to $570 million on revenues ranging from $1.38 billion to $1.88 billion.
A forecasted free cash flow of $170 million to $350 million, along with an expected return on invested capital of 9.8% to 15.7%, align with analyst projections. Greff emphasized that these forecasts are realistic and the UAE’s gaming regulations are favorable.
“The regulatory framework compares favorably with some of the largest IR markets globally, with a 10% to 12% tax rate on gross gaming revenue (GGR),” added the analyst.
Comparatively, this rate is significantly lower than the 40% rate in Macau. While Wynn’s Wynn Macau arm operates two casino hotels in Macau under a 10-year licensing period, Wynn Al Marjan Island has been granted a 15-year permit.
UAE Poised to Be ‘License Restricted’
Although Wynn competitor MGM Resorts International (NYSE: MGM) has expressed interest in obtaining a casino license in a currently non-gaming hotel complex in the UAE, Wynn Al Marjan is expected to have a substantial head start over other gaming establishments in the region. Regulators in the UAE are likely to adopt a practical approach in issuing new licenses.
“We believe this market [UAE], which is likely to have limited licenses and cater to luxury consumers in the region, could exhibit similar characteristics to Singapore’s lucrative and high ROI IR market,” said Greff.
The analyst further suggested that the estimated total addressable gaming market of $3 billion to $5 billion for the UAE could evolve conservatively over time, with the Wynn property holding a monopoly there “for at least a couple of years.”