Wynn Macau Poised to Nab Market Share from Rivals

Posted on: January 18, 2023, 03:59h. 

Last updated on: January 18, 2023, 05:19h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Macau could gain market share in the Chinese territory in the coming years. That’s as premium mass players return to the tables and as operators vie for what is now a splintered VIP demographic, owing to the demise of the junket industry.

Wynn Macau
The Wynn Macau casino hotel. An analyst sees the operator taking market share in 2023. (Image: Wynn Macau)

In a Tuesday note to clients, CBRE analyst John DeCree said industry analysts may be underestimating Wynn Macau’s potential to pilfer market share from rivals this year. Analysts expect the operator to post 2023 revenue that’s 66% of what was seen in 2019, prior to the coronavirus pandemic, and earnings before interest, taxes, depreciation, and amortization (EBITDA) that’s 73% of 2019 levels. Those figures are well below the 78% revenue and 87% EBITDA rebounds analysts are modeling for the six Macau concessionaires in aggregate.

Historically, Wynn earns well more than its fair share in each of the markets in which it operates, including Macau,” according to DeCree. “In 2019, Wynn exceeded its fair share in Macau across every metric.”

In addition to Wynn Macau and Wynn Palace, parent company Wynn Resorts (NASDAQ: WYNN) runs Wynn Las Vegas and Encore on the Strip and Encore Boston Harbor.

Wynn Macau Has Track Record of Efficiencies

Wynn Macau operates the aforementioned pair of integrated resorts in the special administrative region (SAR). While those venues aren’t the largest on the peninsula, the company has an established track record of making the most of its gaming space and guest rooms.

Under the terms of Macau’s new gaming laws, there are caps on how many slot machines and table games each casino can offer. Specific to Wynn, the operator can control 9.5% of the SAR’s hotel rooms and table games. That’s with analysts expecting the company to generate 11.5% EBITDA and revenue share. While that’s a premium to the allotment, DeCree views the estimate as too conservative.

“Given the potentially smaller market, and much less VIP concentration, some operators may not utilize all their allocated table capacity. This could lead Wynn to earn an even greater premium to its fair share if it can successfully consolidate the highest value customer segments and maximize profitability per table and room, as we suspect it will,” added the analyst.

DeCree pointed out that while Wynn Macau has a history of relying on VIP customers, the operator can likely shuffle some of those clients into the premium mass group going forward, which could be accretive to margins.

Wynn Bullishness Abounds

Shares of Wynn Resorts ended 2022 on a strong note, posting a modest annual loss, which was good for one of the better showings among casino equities. The momentum carried over into 2023, with the stock higher by 18.84% year-to-date.

That ascent has been aided by a spate of bullish commentary from sell-side analysts with conviction that as Macau rebounds, there could be upside in Wynn shares.

For his part, DeCree rates Wynn Resorts “buy” with a price target of $130. That’s up from $115 and well above Wednesday’s closing price of $98.36.