The growth engine is in high gear at Wynn Resorts (WYNN -1.16%), and financial results are starting to show fruit after years of construction. Macau, once again, drove the company's growth and continues to be the cash cow for gaming companies.
But Wynn's stock fell as much as 8% in trading last Wednesday following the company's most recent quarterly report because investors were concerned about its reliance on VIP players. And there are pluses and minuses to Wynn's high-end strategy in the gaming industry.
Rendering of the now open Wynn Palace. Image source: Wynn Resorts.
Macau dominates again
No surprise that Macau was the highlight for Wynn Resorts. Overall Macau revenue was $1.10 billion and adjusted EBITDA was $297.8 million. Wynn Macau, the older resort on the Macau Peninsula, dominated results with $682.7 million in revenue and $210.4 million in adjusted EBITDA.
The results wouldn't be complete without looking at casino gaming volume, which I've laid out below, along with their sequential changes since Wynn Palace wasn't open a year ago.
| Location | Q2 2017 | Q/Q Change |
| Wynn Macau VIP Volume | $16.02 billion | 20.6% |
| Wynn Macau Mass Market Volume | $1.07 billion | (6.1%) |
| Wynn Palace VIP Volume | $11.60 billion | 5.1% |
| Wynn Palace Mass Market Volume | $729.0 million | (5.3%) |
Source: Wynn Resorts Q2 2017 earnings report.
You can see that VIP gaming volume was strong, but Wynn Palace had a fairly weak quarter compared to its older sister resort. That was blamed on the construction taking place around Wynn Palace, including MGM Resorts' (MGM 0.90%) new Cotai property. Once surrounding construction is completed, Wynn should be well positioned as the first stop on the light rail from the ferry station and a new walking connection to the rest of Cotai. For now, its location is a hinderance.
Las Vegas is no slouch
In Las Vegas, revenue was up 3.1% versus a year ago to $431.9 million, and adjusted EBITDA was $132.2 million, an increase of 8.1% from a year ago. Results were helped by better luck than last year, but were still within the expected range. Las Vegas isn't going to be a huge growth area until the golf course is developed, which may begin early next year, but it's a solid contributor to the company's cash flow.
Boston is on track
The next big growth project is Wynn Boston Harbor, which is expected to be done in mid-2019. Wynn has spent $771.8 million of an estimated $2.4 billion on the project, which will make it difficult to reduce the current $9.81 billion debt load. But this will be a big domestic resort that can contribute cash that can be used to pay dividends without repatriation taxes.
The long-term story is still strong for Wynn
If you're a Wynn investor, I wouldn't be worried about the weak mass market revenue, particularly at Wynn Palace. Construction around that resort isn't yet fully complete. Instead, your focus should be on incredible performance at Wynn Macau, which is driving Macau's results until Wynn Palace fully ramps up. And when it does, Wynn Palace could easily generate more EBITDA than Wynn Macau, which could mean as much as $1 billion in EBITDA from the new property.
Macau's results will be volatile, but both resorts look like they'll be highly profitable long-term. And with consistent cash flow coming from Las Vegas the company is well positioned to enter a new phase of growth, which is more important than the ups and downs of the gaming market in a single quarter.
