Wynn Resorts, Limited (WYNN -1.60%) isn't yet a complete product, but it's showing its potential for future cash flow in Macau. In the fourth quarter, the $4.4 billion Wynn Palace completed its first full quarter of operations and nearly became the company's highest-revenue resort.
It'll take some time for investors to get a full picture of what Wynn's future looks like, particularly in Macau, but so far, so good.
Wynn Palace in the Cotai region of Macau. Image source: Wynn Resorts.
The numbers
Wynn's fourth-quarter revenue jumped 37.3% to $1.30 billion, and adjusted property EBITDA, a proxy for cash flow from a resort, rose 18.6% to $340.9 million. Net income jumped 30.5% to $113.8 million, or $1.12 per share. But more important than the top-line numbers is a look at how the company's three resorts are performing.
Wynn Las Vegas revenue fell 2% to $383.3 million, and EBITDA fell 10% to $114.6 million. Most of the decline can be attributed to a 10.6% decrease in table game win and a 6.3% decline in retail and other revenues. Las Vegas continues to be a consistent cash generator, although results were down slightly in the quarter.
Wynn's Macau operations were far more eventful in the quarter. Wynn Palace was open for the entire quarter and naturally took some business from Wynn Macau, mainly because of a table game transfer to the newer resort. That resulted in a 10.3% decline in Wynn Macau's revenue to $465.3 million and a 7% decline in EBITDA to $148.9 million.
Wynn Palace more than made up for the loss in business at Wynn Macau. The property generated $418.7 million in revenue and $77.5 million in EBITDA. It's not surprising that EBITDA margin of 18.5% is well below the Wynn Macau margin of 26.8% because it often takes a property a few quarters to iron out operations. As time goes on, the margin will likely increase.
What's encouraging is the volume already flowing through Wynn Palace. Last quarter, the average table game generated $14,926 in revenue per day. That's less than the $21,559 in revenue per table per day at Wynn Macau, but more than the $13,244 Las Vegas Sands (LVS -0.94%) generated at The Venetian Macau and $9,600 at Sands Cotai Central, both near Wynn Palace. Wynn has a history of outperforming neighbors, including both locations where Las Vegas Sands is nearby, so I would expect Wynn Palace to surpass most, if not all, of Las Vegas Sands' properties on an EBITDA basis, which would mean nearly $1 billion in EBITDA at Wynn Palace annually.
Trends to watch in the future
Investors will want to see Wynn Resorts continue to attract customers to Wynn Palace, and the more it can take from competitors rather than cannibalize from Wynn Macau, the better. And now that the VIP market is growing, it's possible Wynn will be able to capture more market share in its VIP-focused business.
It'll also be key to watch margins going forward, which should rise as Wynn Palace gets into a more normal routine. And if margins rise, so will profitability, and that's what investors have been hoping for from this new property all along.
