Wynn Resorts (Nasdaq: WYNN ) came out with earnings last night, and there wasn't much to be impressed by. Las Vegas was weak, which may not be a huge surprise, but Macau failed to pick up the slack. As a result, shares have been punished today, falling 6% as I am writing.
Macau doesn't live up to the hype
Macau performance was OK, but we've come to expect a lot more from the gambling enclave. Revenue was up 9.8% from a year ago to $950.7 million, and property EBITDA was only up 6.2% to $289.8 million. By comparison, the EBITDA growth was lower than every one of Las Vegas Sands' (NYSE: LVS ) properties in Macau.
We are starting to see the reason Wynn has worked so hard to get a foothold in Cotai. MGM Resorts (NYSE: MGM ) also saw a decline in EBITDA from the fourth quarter, an indication that Cotai is stealing share. Between the Melco Crown (Nasdaq: MPEL ) and Las Vegas Sands resorts and the casino Galaxy opened there last year, critical mass is approaching in Cotai.
Las Vegas hits a losing streak
The terrible numbers in Las Vegas are partly due this quarter's bad luck and last year's phenomenal luck, which make for a rough comparison. Revenue actually fell 8.1% from the prior year to $362.8 million, and adjusted EBITDA fell 23.6% to $100.9 million. Even the results from Caesars Entertainment (Nasdaq: CZR ) easily beat those numbers.
I wouldn't be too alarmed by the Las Vegas numbers. As Steve Wynn said in the conference call, results can be volatile when you're dealing with the top end of the market. Still, they were a little worrying in the short term.
Should you buy the drop?
Las Vegas Sands is a better buy right now, trading at the same enterprise value/EBITDA ratio as Wynn even before accounting for Sands Cotai Central. But if Wynn continues to drop, I would take another look at shares. Wynn is a more conservatively run company than Las Vegas Sands, and for investors who want a little more safety in their portfolio, Wynn can provide it in the gaming industry.
If shares fall below $110, I may add this to my account for the exposure to Macau, as well as the dividend yield of 1.6%. If you can wait four or five years, which seems like an eternity on the market, Wynn will be opening a major resort on Cotai that could double its EBITDA. If you can get in at the right price, it should be worth the wait.
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