Wynn Earnings: Macau Demand Continues To Improve, With Vegas Sales and EBITDA at All-Time Highs

We plan to increase our $117 fair value estimate for narrow-moat Wynn WYNN by a low-single-digit percentage to account for a stronger Macau gross gaming revenue industry sales recovery.

Despite the company’s peninsula property undergoing casino floor renovations (which were completed in the current quarter), Wynn Macau revenue reached 65.5% of 2019′s level, up from 48% last quarter. Visitors are returning to the gaming enclave after the removal of COVID-19 restrictions in January—in fact, Macau room occupancy was nearly 97%. We plan to lift Wynn’s 2023 Macau sales to 60% of 2019′s level from the low-50s as we take our industry gaming revenue forecast recovery to the low-60s from about 50% prior. Looking to 2024, we still see industry gaming sales nearing a full recovery, with Wynn’s revenue around 80% of prepandemic amounts versus our prior estimate of 75%. Long term, we remain constructive on the large demand source of 1.4 billion people in mainland China serviced by just six market licenses. On the profitability side of the ledger, Wynn Macau’s EBITDAR margins reached 32% (29.3% year-to-date) versus 26% last quarter, aided both by demand recovery and a favorable mix shift to mass play and retail consumption. We plan to increase our 26% preprint 2023 forecast to 28% as a result.

Vegas revenue continued to grow, up 3% in the quarter and 16% in the first half of the year. Hotel room occupancy remained strong at 90.6% in the quarter versus 89% last quarter. Wynn noted July demand remained robust with no signs of consumer weakness. We still think Wynn’s Vegas assets can see low-double-digit sales growth in 2023, aided by the Formula 1 event later this year. Meanwhile, Vegas EBITDAR margins were 38.8% in the quarter and 39.1% in the first half of 2023, tracking to our 38% estimate, which we plan to maintain.