Fitch highlights strong Macau recovery in encouraging Wynn Resorts outlook
Macau’s gaming industry took a huge hit during the pandemic with extremely tight restrictions grinding the market to a halt.
However, the removal of travel restrictions in early 2023 has sparked an impressive response from the industry. Fitch estimates that mass-market baccarat has recovered to pre-pandemic levels, particularly in the premium mass market that Wynn targets.
Mass-market baccarat in 2023 was 91% of 2019’s numbers, with Q4 2023 exceeding Q4 2019. Visitation and airline capacity are still below 2019’s figures, too, suggesting the industry could see even further revenue growth in the near future.
Wynn’s Macau operations accounted for $910.6m (£718.5m/€838.9m) in Q4. Of that figure, $524.4m came from Wynn Palace in what was another impressive quarter, with mass-market revenue and property EBITDAR margins for Q3/2023 already above 2019.
Fitch noted Wynn Macau’s slower rebound with the property increasingly targeting the premium mass market rather than the VIP sector.
Wynn’s financial improvement
Fitch is predicting Wynn’s EBITDAR leverage to improve from just below 7x in 2023 to low-5x by 2025. Fitch says continued growth in Las Vegas and Macau will help with this, with a rise in EBITDA and partial debt reduction.
The operator is also expected to be free cash flow (FCF) positive over the forecast horizon. Wynn is in a strong liquidity position with $2.8bn in cash, $792m in short-term investments and $737m of availability on the Wynn Resorts Finance LLC (WRF) revolver.
Fitch is predicting Wynn’s credit position to further improve despite ongoing material projects in the likes of Las Vegas and the United Arab Emirates. A potential casino in New York could also be on the cards.
Wynn’s Macau success in face of US roll-back
Last year, Wynn announced it would be significantly diminishing its operations in the US. It exited Massachusetts last week having already ceased operations in Arizona, Colorado, Indiana, Louisiana, New Jersey, Tennessee, Virginia and West Virginia.
Penn Entertainment also agreed to acquire Wynn Interactive Holdings’ New York sports betting licences last week, clearing the way for Penn to launch ESPN Bet in the state in 2024.
Wynn operations are still active in Nevada, though, with Las Vegas revenue climbing 16.3% to $2.48bn in 2023.
Commenting on Wynn’s Las Vegas operations, chief executive Craig Billings said: “In Las Vegas, we continue to distance ourselves from peers as the leader in luxury. It’s more evident than ever that we are the go-to spot for the best customers attending citywide events like F1.”