Wynn Earnings: Demand and Profit Improvement in Vegas and Macao Led to a Reinstated Dividend

We plan to increase our $109 per share fair value estimate for narrow-moat Wynn WYNN by a mid-single-digit percentage to account for strong sales and profits in Las Vegas and Macao. Wynn’s Las Vegas results continue to reach new heights, with first-quarter revenue at 146% of 2019′s level, above our 140% estimate for the full year. Vegas occupancy was 89% versus 83% in the comparable 2019 period, while the average daily rate was a staggering 146% of prepandemic marks. Wynn is seeing no signs of demand weakness in the region, and we think group and international travel, along with a strong calendar of events in the second half, can push Vegas to around 13% sales growth in 2023 versus our prior expectation of 7%. Meanwhile, Vegas EBITDA margin was 39.5%, up nicely from 36.1% last year, aided by mix shift to group and overseas customers. Here we plan to lift our 2023 margin forecast to 38% from 36%.

Macao’s recovery is in full effect after the removal of travel restrictions Jan. 8, 2023. Wynn’s revenue in the region reached 48% of 2019′s level, roughly in line with the recovery rate seen in industry gross gaming revenue, despite the company’s peninsula property undergoing renovations (which are scheduled to be complete in the current quarter). We plan to maintain our prognosis for Wynn’s Macao sales to reach 52% of 2019′s level in 2023. Wynn’s Macao EBITDA margin jumped to 26%, aided by a favorable mix shift to mass play and retail consumption. We plan to increase our 17% estimate for the full year toward the high-20s.

Given strong demand across its portfolio, Wynn’s liquidity position is improved, leading the company to reinstate a $0.25 dividend starting this June. The company has $4.7 billion in cash and available credit, its U.S. assets have generated over $1 billion in EBITDA during the last 12 months, and Macao has turned to profitability. This will help the company service the $5.6 billion in debt set to mature through 2025.