Wynn Macau’s EBITDAR May Exceed Estimates for 2023


The Wynn Macau arm of Wynn Resorts (NASDAQ: WYNN) could surpass previous forecasts and generate a substantial 2023 earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of $917 million, according to CreditSights.

Wynn Macau EBITDAR
Wynn Palace in Macau. Operator Wynn Macau could exceed EBITDAR estimates this year.(Image: Wall Street Journal)

CreditSights initially estimated Wynn Macau’s base case for 2023 EBITDAR at $632 million, with a bull case of $892 million. However, the research firm has revised its projection upwards due to the substantial margin improvements exhibited by the gaming company. Wynn Macau, which operates an eponymous venue as well as Wynn Palace in Macau, has experienced a healthy recovery in its Macau business since China lifted its Covid travel restrictions in early January.

Furthermore, Wynn Resorts, the parent company based in Las Vegas, reported record adjusted property EBITDAR for its North American properties, including Wynn and Encore Las Vegas and Encore Boston Harbor.

Wynn Macau’s Impressive Recovery

If Wynn Macau achieves or slightly surpasses CreditSights’ projection of $917 million in 2023 EBITDAR, it will provide further evidence that the operator is on track to regain its pre-coronavirus pandemic earnings form in the near future.

One noteworthy factor contributing to Wynn Macau’s remarkable recovery is its strategic shift away from VIPs to focus on mass and premium mass bettors. This move has allowed the operator to gain market share from its competitors in these segments, which are more margin-efficient.

CreditSights has also emphasized the potential upside for Wynn Macau, citing higher-than-expected business volumes and improved cost efficiencies as factors that could propel the operator’s success. This is not only positive news for Wynn Macau but also for the other six concessionaires operating in the region.

According to Jefferies analyst Andrew Lee, Macau is experiencing an increase in summer tourism from mainland China, with Chinese tourists showing a clear preference for the gaming hub over other destinations such as Hong Kong and Taiwan. In fact, Macau was the top overseas destination for Chinese tourists in the first half of 2023, based on data from the China Tourism Academy.

Analysis of Wynn Macau Bonds

CreditSights has also analyzed Wynn Macau’s leverage, suggesting it could rest at 7.4x by the end of this year. This favorable leverage ratio could have a positive impact on the operator’s corporate debt.

The research firm highlights that Wynn Macau’s 5.5% bonds maturing in 2026 currently yield 8.2%, making them more attractive than the 5.875% MGM China notes set to mature in the same year with a yield of 7.7%.

Additionally, parent company Wynn Resorts recently announced its intention to repurchase up to $300 million of its $1.78 billion 5.5% corporate debt maturing in August 2025, further demonstrating its strong financial position.

Based on these factors, CreditSights views Wynn’s cash position as more than sufficient to fund the cash tender offer.

Furthermore, the operator may strengthen its balance sheet by realizing cost savings through the discontinuation of its online sports wagering operations in eight states.

 

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