Published on: October 8, 2024, 03:03h.
Last updated on: October 8, 2024, 03:07h.
Wynn Resorts’ (NASDAQ: WYNN) recent approval of a casino resort in the United Arab Emirates (UAE) has the potential to significantly boost the operator’s long-term free cash flow.
In a recent report, CBRE Equity Research analyst John DeCree predicts that once operational, Wynn Al Marjan Island could generate over $350 million in annual free cash flow (FCF) for the parent company based in Las Vegas. Construction on the venue began earlier this year, with an expected opening date in early 2027.
With a 40% ownership stake and management contract, we estimate that Wynn Al Marjan Island could contribute more than $350 million in FCF to Wynn upon stabilization,” stated the CBRE analyst.
Prior estimates suggested that Wynn Al Marjan Island could potentially bring in up to $1.4 billion in annual gross gaming revenue (GGR), positioning the wider UAE casino market to reach between $3 billion to $5 billion in yearly GGR if additional gaming venues are approved.
Recognition Still Lacking for Wynn in UAE
Last week, the General Commercial Gaming Regulatory Authority (GCGRA) of the UAE approved a commercial gaming facility operator permit for Wynn Al Marjan Island. This marked the first such approval in the history of any Middle Eastern nation.
However, analysts, including DeCree, argue that investors have yet to acknowledge the potential impact of the UAE project on Wynn’s earnings, despite its potential as a significant revenue driver in the future. With no other casino licenses approved in the region at present, Wynn could enjoy a temporary monopoly, giving it a competitive advantage over potential rivals.
“Investors have yet to give Wynn Resorts credit for Wynn Al Marjan Island, which we estimate could generate approximately $920 million in earnings before interest, taxes, depreciation, and amortization (EBITDA),” DeCree noted.
The analyst believes that the approval of the UAE permit could reignite investor interest in Wynn’s shares. Wynn holds a 40% stake in the $4 billion UAE project and is expected to be able to self-finance its commitment of around $900 million.
Strategic Approach to Gaming in the UAE
One reason for the lack of investor recognition for the Wynn Al Marjan Island integrated resort in Ras Al Khaimah (RAK) could be the UAE’s cautious approach to casino gaming.
“It is unlikely that the UAE will legalize gambling on a broad scale any time soon due to cultural sensitivities in the region,” DeCree added. “The UAE government is taking a thoughtful and deliberate approach, and we are confident in the legislative and regulatory framework.”
The analyst recommends a “buy” rating for the stock. Wynn is hosting an event today at its flagship integrated resort in Las Vegas to discuss the UAE project with analysts and institutional investors.