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Wynn stock trips after key Macau exec behind Palace departs

People wait to get in outside Wynn Palace, U.S. casino tycoon Steve Wynn's newest resort, during its opening in Macau, China August 22, 2016.
Bobby Yip | Reuters
People wait to get in outside Wynn Palace, U.S. casino tycoon Steve Wynn's newest resort, during its opening in Macau, China August 22, 2016.

Shares of Wynn Resorts fell as much as 3 percent Friday after it disclosed a key executive behind its newest Macau resort had resigned.

Wynn Macau, an indirect subsidiary of the Las Vegas-based company, said Gamal Aziz resigned as president and as a board member. He led the development and opening of the $4.1 billion Wynn Palace, which opened its doors Aug. 22.

"His departure should be an indication that the post-opening ramp of the Palace has been disappointing," Nomura analyst Harry Curtis said in a note to clients Friday. "We believe that Wynn Macau has retained most of its business but that the all-important mass segment at Palace has been slow to develop."

Wynn stock was recently down $2.61 a share, or about 2.6 percent, to $97.94 in late day trading. More than 5.5 million shares had changed hands compared with its 10-day average daily volume of 3.6 million shares. The stock still is up 41 percent so far this year.

In an emailed statement, Wynn Resorts said "Aziz was brought in to lead the development and successful opening of Wynn Palace Cotai. Having completed that assignment, Mr. Aziz resigned with the thanks of the Board of Directors, who expressed its gratitude to Mr. Aziz for his significant contributions to the company."

Aziz will be replaced by Ian Michael Coughlan, who previously was in charge of the company's Wynn Macau resort. Coughlan now will be responsible for the entire operation and development of both the Wynn Macau and Wynn Palace resorts.

Nomura's Curtis said he expects it to take "a long time" for the Palace resort property to build its mass market presence. The analyst said maintained a "reduce" investment rating on Wynn Resorts stock.

The 1,700-room megaresort is focusing on so-called premium mass gamblers, a gaming segment that hasn't been impacted as severely in the Macau slowdown as the high-roller VIP market.

"While the management change at Wynn is suggestive of a slower ramp at Palace, this is not unprecedented or new news, and does not change the long-term potential of the property, in our view," Morgan Stanley analyst Thomas Allen said in a research note Friday. "This is not the first time Wynn has turned over management early in a property's life."

Still, Allen expects there's a risk to the second-half estimates and he lowered Morgan Stanley's third-quarter estimate for Wynn Palace's earnings before interest, taxes, depreciation and amortization (also known as EBITDA), to below Street consensus and also took down the fourth-quarter EBITDA forecast; no change was made to the 2017 estimate.