Wynn turns the tables for Palace opening

Wynn turns the tables for Palace opening

Tuesday, August 2, 2016 Posted by Andy McCarron
Wynn is moving the tables in Macau as it prepares for the Wynn Palace opening

With the news that the Wynn Palace at Cotai – likely to be allowed only 100 new tables by Macau’s gambling authorities – will be shifting tables from its current property to cover an opening night shortfall, we at least know that the removal men will be busy later in the month.

In the second-quarter results statement from parent company Wynn Resorts released at the end of July, the firm said it believed it would be allocated 100 tables at opening with a possible further slew of tables likely post- the 22 August launch date.

Though the company said it had yet to receive full notification, it added that it was planning to shift 250 existing tables from its current Wynn Macau peninsular property to make up the numbers, leaving the latter property with 270 table games.

The news split the analysts. Union Gaming put a brave face on the predicted allocation, suggesting that though it was the lowest recent day-one opening tally (Galaxy was granted 150 new tables while Macau Studio City was given 200), it was not surprising given the current environment in the SAR.

“While we would have liked to have seen a larger estimated allocation (150 or 200) the fact that management expects 100 tables does not cause us to revise our expectations for Wynn Palace or Wynn peninsula,” said Union analyst Grant Govertsen. “An allocation of 100 tables to Wynn Macau is only likely to potentially result in a pinch on the busiest day of the busiest holiday but otherwise shouldn’t be an issue.”

However, pessimism was more in evidence at Morgan Stanley where analyst Praveen Choudhary said the market would be disappointed with the 100 tables figure. “Even though Wynn claimed that only one-third of VIP tables are profitable, shifting 250 tables from Peninsula will cannibalise EBITDA m-eaningfully in our view,” he said in a note to clients.

Focusing on the mix between mass market and VIP tables, Choudhary suggested that with the tables shuffled around the expectation was that the percentage share would be 80/20 mass versus VIP. This compares with a percentage mix at the Wynn Macau in the second quarter of 43/57.

Should Wynn Palace be allocated the expected 150 top-up tables post-launch, though, Morgan Stanley suggest the company can make up the EBITDA shortfall but it still sees risks of further competition on Cotai from the soon-to-open Parisian property opening in September and from further cannibalisation.

In comparison, Union Gaming is also more positive on long-term trends for the Wynn properties in Macau, suggesting the company will be able to entice new players to its empty rooms in the Peninsular while the Palace will be taking market share from the City of Dreams, in particular, and also from the Sands Cotai Central, the Four Seasons and the Galaxy.

In the short-term, though, Wynn Palace will be facing up to headwinds both economic and weather-related. According to the latest figures from the Gaming Inspection and Coordination Bureau, Macau endured the 26th continuous month of gaming revenue decline, down by 4.5% in July to register GGR of MOP17.8bn ($2.2bn).

The deleterious effect of the continued gaming revenue declines on Wynn Resorts was clear from its results. While total casino revenues for the Macau business as a whole rose 5.2% to $608.9m, VIP table games turnover fell 23.8% while mass market table drop fell 1.7%. The average number of VIP tables fell to 183 for the second quarter compared with 247 in the same period last year.

The percentage decline in July across the market represented an improvement on the average monthly year-on-year decline of 11% in the first half of the year. But analysts believe August will struggle as VIPs delay trips until the end of the month for the Palace opening and also await the passing of the oncoming Typhoon Nida, due to hit the Pearl River Delta region within the next few days.

Totally Gaming says: Calling trends in Macau has long been an exercise in futility as the run of negative growth trends continues now into its 26th month. The analysts are confident the Wynn Palace will eventually be allocated the extra 150 tables needed soon after opening, pointing out that the authorities have allocated 200 tables in the year-to-date compared with 445 in the whole of 2015. There might be more work in store for the removals experts.

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