Wynn Macau’s Q4 Loss Expected, Strong Lunar New Year Performance Confirms a Solid Recovery in 2023

Wynn Macau’s fourth-quarter EBITDA loss was well-anticipated by the market, and we’re encouraged by the company’s robust Lunar New Year performance, in which hotel occupancy hit around 96% and mass gaming volume at 95% of 2019 levels. In addition, management also indicated its average daily EBITDA rose to USD 4 million during the seven-day holiday, compared with USD 4.3 million per day on average in the first quarter of 2019, and that postholiday demand in both mass and direct VIP segments remains strong. We think these positive data points reaffirm our view that a solid recovery of Macao gaming demand is underway. We maintain our assumption of industry gross gaming revenue, or GGR, returning to 50% of 2019's level in 2023, up from 14.4% in 2022. We raise our fair value estimate for Wynn Macau to HKD 8.00 per share from HKD 7.80, after rolling our model one year forward. Our tweaks of earnings forecast are minor, and we expect Wynn Macau’s adjusted EBITDA to come in at a positive HKD 2.5 billion in 2023, compared with a negative HKD 1.7 billion in 2022. We think the shares are fairly valued as of market close on Feb. 15.