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Steve Wynn cautions against 'short-term myopia,' defends Macau mass-market business

  • Wynn Resorts second-quarter revenue and adjusted earnings beat analysts' estimates, but the company showed softer than expected mass-market results for its Macau business.
  • The Wynn Macau property showed higher total casino revenue but experienced weakness on the mass side.
  • The company's newer Wynn Palace in Macau's Cotai district produced sequentially soft mass results, too.
  • On the news, Wynn stock was down early 4 percent in after-hours trading.

Wynn Resorts on Tuesday said its Wynn Macau casino posted improved total casino revenue in the second quarter, helped by strength on the VIP gaming side – but there was softness in the mass-market operations.

At the same time, the company's Macau Palace property, which opened last August, made a significant contribution to overall results but also was lighter on mass on a sequential basis, falling below some analyst forecasts. Even so, the Wynn Palace produced casino revenue of $372 million in the second quarter, or about 180 percent more than the company's combined Las Vegas operations.

Overall, Wynn's adjusted earnings per share in the quarter were $1.18 per share, up 10 percent from a year ago and ahead of analysts' consensus of $1.16 per share, according to Thomson Reuters. Revenue totaled $1.53 billion, representing a 44 percent jump from a year ago and ahead of the Street's $1.45 billion consensus.

However, investors seemed more concerned with the softness in Macau's mass-market business, which is considered more profitable than the VIP side because there are no commissions.

On the news, Wynn stock lost nearly 4 percent in after-hours trading.

The first question on the earnings conference call was about the mass-market softness in the latest quarter, although Wynn Resorts Chairman and CEO Steve Wynn cautioned analysts that they shouldn't read too much into such short-term trends.

"It's very important that you don't get caught up in the very short-term myopia that your professions demand in many respects," said the casino mogul. "It's the big things that determine the long-range viability of these places."

Added Wynn, "When we look at the numbers that you're looking at...we say the train is on schedule. The future of the company is being built intelligently, with a strong foundation."

That said, he conceded trends in the "gambling room" can be volatile but was quick to add it's "less than half of our business."

To make the point, he said the Las Vegas operations in the last four days had "10 or 15 international players [that] contributed $12 million in a slow month."

As for Macau, management said, despite any softness in its mass-market business, that the company still was making sequential market share gains against its competitors.

During the second quarter, Wynn Resorts said its total Macau operations increased market share in VIP, mass-market and slots when compared with the first quarter.

Wynn Macau President Ian Coughlan said during the call the premium mass market level may have been impacted too by the smoking ban issue. Macau banned smoking from casinos but government officials let some lounges focused on "high-limit" VIP gaming get around the rule.

"There are spaces in town that have been grandfathered in," Coughlan said. "That all goes away the beginning of 2019. [And then] everybody has a level playing field. We will be the biggest beneficiary of that because we're operating handicapped right now."

The company's $4.3 billion Wynn Palace resort in Macau was its first casino in the Cotai district, and it will soon be joined by an adjacent property operated by MGM Resorts. The $3.3 billion MGM Cotai resort is scheduled to open in the fourth quarter and likely increase competition for Wynn.

"The mass is really affected by the physicality of the neighborhood," said Wynn. And he said the Wynn Palace resort in particular faces "obstacles" on many sides currently from such things as light rail construction and other off-site challenges.

"Mass has an awful lot to do with access," Wynn said. "We're literally surrounded on four sides by things that are under construction that will all add to our mass."

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