Wynn Resorts, Limited: 1Q19: VIP Blues but Mostly as Expected

 

WYNN felt the pressure of weak high-end Chinese play in both Vegas and Macau, so while mass trends were strong (Macau core mass up 13%, Vegas slots up 11%), EBITDA was down 12% y/y. This was expected given mkt trends, and 1Q EBITDA was only 1% below our estimate. We adjust ests, and remain EW.

1Q19 Results. WYNN reported 1Q19 property EBITDA of $495m, slightly below MSe $501m / cons $507m. We lower our 2019 / 2020 estimates to reflect weaker underlying VIP trends and a slower ramp at Encore Boston Harbor, and now forecast total 2019 / 2020 property EBITDA of $1,965m / $2,326m vs. prior $2,036m / $2,381m. That said, with China macro trends appearing stronger, WYNN's raised dividend (now $4 annualized vs. prior $3), and the removal of the Massachusetts license overhang for WYNN, we raise our 2020 valuation multiple to 11.0x from 10.3x. As a result, our price target rises slightly to $135 from $130; remain Equal-weight.

Macau. 1Q19 property EBITDA of $387m was between MSe $391m / cons $383m, supported by $25m of high hold (high hold was expected, but not to this level). Market share was 15.3% and with high hold, down from 16% in 2018. WYNN is suffering from being more exposed to the VIP and premium mass segments of Macau, which are seeing the greatest weakness. Its core mass market revenue was up 13%, but that was not enough to offset the other segments. In addition, WYNN is renovating parts of its peninsula property, and highlighted increased competition in Cotai from MGM's new mansions and MLCO's Morpheus tower. We lower our 2019e Macau EBITDA estimate to $1,424m from $1,462m to reflect slightly lower share (15.1% vs. 15.3%) mostly coming from the peninsula, but given the 2019 renovation headwinds, our 2020 estimate comes down less to $1,555m from $1,571m.

Vegas. 1Q18 property EBITDA of $108m came in lower vs. MSe $110m / cons $124m. The property also benefitted from $5m of high hold, but was hurt by $4m of bad debt. Table drop was down 25% but mgmt noted ex baccarat, it would have been up 10% y/y, and slot handle was up 6%. RevPAR declined 2%, but as expected given a large group shifted from 1Q to 2Q. Mgmt also noted baccarat trends had improved in 2Q so our 2Q-4Q19 estimates drop only slightly, and we forecast 2019 / 2020e Vegas EBITDA of $460m / $516m vs. $466m / $521m prior.