Wynn Resorts Craps Out on Bad Luck

Steve Wynn better hope he can build his resort on Cotai in Macau in record speed because the resort he is currently operating on the Macau Peninsula isn't performing as well as he hoped. There's no way around it, the numbers are bad coming out of Wynn Resorts (Nasdaq: WYNN  ) right now.

In the second quarter, revenue fell 8.4% to $1.25 billion, property EBITDA fell 14.1% to $384.1 million, and net income fell to $139.0 million, or $1.38 per share. Declining results in both Macau and Las Vegas were responsible for the worsening results, particularly poor VIP business in Macau.

We've seen gaming dollars move to Cotai in recent quarters with Las Vegas Sands (NYSE: LVS  ) and Melco Crown's (Nasdaq: MPEL  ) resorts there outperforming rivals on the Macau Peninsula. This may be what is happening again given the fact that gaming revenue rose 21.9% in April, 7.3% in May, and 12.2% in June. There wasn't a growth of supply versus last year so the revenue has to be going somewhere.

Wynn blamed the volatility in the high limit baccarat business and hold percentages, which he said were 37% last year and 17% this year. There is also a big increase in competition with gaming revenue slowing in Macau. Wynn said that Sands has been aggressively giving discounts and promotions to customers to fill their properties in the quarter. Hold percentage and discounting vary from quarter to quarter so the market hasn't really freaked out about the results.

On Cotai, the company said its loan for building the resort is almost a done deal. The company is preparing the foundation and should release details of the project to investors soon.

Back in Las Vegas, revenue fell 11.6% to $345.6 million and adjusted property EBITDA fell 38.3% to $81.9 million, again affected by hold percentage. Wynn did report a 7.6% increase in table game drop, an indication that Caesars Entertainment (Nasdaq: CZR  ) and MGM Resorts (NYSE: MGM  ) may not experience the same revenue hit when they report earnings.

The results look extremely bad for Wynn in the second quarter but when you peel back the details they aren't quite as bad as they appear. Hold has run in Wynn's favor recently and now it has to pay the piper. I don't think this makes the stock a buy, but it isn't a reason to run for the exits either.

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Fool contributor Travis Hoium manages an account that owns shares of Wynn Resorts and Melco Crown. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On July 20, 2012, at 11:04 AM, cp757 wrote:

    WYNN came in at $1.37 per diluted share, bit thats not the end of the story. The VIP was down for WYNN by 7.2% and that was his claim to fame. Steve Wynn has not taken advantage of mass market, and thats where LVS is adding market share, WYNN had a decrease of 2.7% in mass market because it went to Las Vegas Sands.

    Las Vegas Sands is the King of Mass Market and Wynns Slot machine handle declined 22.1% because WYNN has 939 slots and the mass market moved to Cotai Central because Las Vegas Sands has 3,547 Slot Machines. I guess with Steve not getting in the mass market game it hurt his bottom line. I don’t think adding a pool will help but he has a casino that will open in 2016.

    In Vegas WYNN had a 38.3% drop in Adjusted property EBITDA year over year and it shows he is frantic to hold on to market share. He spent a lot of money to get the players. My take is that almost 40% drop is because LVS is taking market share from WYNN in Vegas.

    In Macu WYNN had Adjusted property EBITDA in the second quarter of 2012 was $302.2 million, down 3.9% from $314.3 million in the second quarter of 2011

    In Las Vegas Adjusted property EBITDA of $81.9 million was down 38.3% versus the $132.7 million generated in the comparable period in 2011 for WYNN.

    EBITDA margin on net revenues for WYNN was 23.7% in the second quarter of 2012 that’s down 10.3% Year over Year.

    WYNN currently has 504 tables in the old macau (290 VIP tables, 203 mass market tables and 11 poker tables) and 939 slot machines.

    LVS currently has 1,125 tables ( 403 VIP tables, 722 mass market tables) and 3547 slot machines. That makes them the master of mass.

    That casino Wynn will open in Cotai should come on line with 2000 rooms about six months after LVS opens 3,600 rooms on Lot three.

  • Report this Comment On July 20, 2012, at 2:00 PM, JF125780 wrote:


    I have had a position in LVS since inception and LVS has dropped from $45.00 to $41.00 in almost 8 years.

    Wynn came out at $15.00 and currently around $98.00

    For the life of me I can't understand why LVS isn't twice Wynn's price.

    The only conclusion I can come up with is Steve has given generous special dividends along with his regular dividend and Sheldon and the insiders have been taking multi-million dollar bonuses for themselves __ plus dumping GIVEN stock onto the market.

    I still believe in the company, but please help us by giving the shareholders a chance to show a profit.

    We are owners too!

    Danny Kowkabany

  • Report this Comment On July 20, 2012, at 2:59 PM, cp757 wrote:

    Danny great question and I know you know the market so what I say is nothing new to you. I have read your posts in the past. I understand what you are saying. Its all perspective.

    At a party I was at in 2011 one of my friend's told me he had invested in WYNN and since I knew about stocks what did I think. I told him about AAPL and how they would have revenue growth and I told him about Westport Innovations WPRT because it was a change from diesel to Natural gas in trucking. I said the only stock in the gaming sector that I thought had growth was Las Vegas Sands.

    From March 9th 2009 they have had a 3000% increase and the stock will grow revenues for the next 20 years with a 2.4% dividend. I still have a price on the stock at 75 dollars for this year. I also think WYNN will go much lower because of revenue. Wynn's revenue was off 40% in Vegas and thats not bad luck thats a disaster.

    My friend called me later and told me he had paid over 163 dollar a share in July 2011 and the stock was lower what did I think he should do and I said Sell. In 2005 AAPL had about the same amount of revenue as LVS and they had a split adjusted price in the low 30's. I believed in a strong CEO and revenue. Not top line growth or a flash in the pan CEO, I want bottom line growth and vision. I thought Steve Jobs gave me both. Ballmer with MSFT was not the place to be and proved my theses. Now APPL will have 200 billion in revenue in a few years and for the stock to pull back like it did is just crazy but thats what happened.

    WPRT ran to over 50 and then had a 50% pull back and now they are almost to 40 dollars.These trading companys dont make their money on a 7 dollar trade.

    Day traders are having a ball in this market for the ones that are right. The ones that are making the wrong call feel just like the long term investors. My friend took a loss on WYNN and moved on. He still has not bought back into the market and every time I see him he asks if they found out what caused the flash crash.


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