Considering the fact that Wynn has only two resorts (with a third on the way), it's important to keep an eye on the factors that drive these markets. Here are the most important areas to watch.
- Macau gaming growth (particularly VIP):
Growth in Macau will drive the trajectory of gaming companies just as it has in the past few years. Supply is limited, so any increase in gaming traffic is good for casino operators, especially before 2016, when supply will increase again. VIP play, which drives 70% of Macau's gaming revenue, is a key thing to watch for Wynn going forward. Play has slowed for the VIP market in 2012 while mass-market play has picked up. More mass-market play in Macau isn't bad for Wynn, but with a focus on VIPs it will be key to watch trends at the top of the market.
Growth in Las Vegas:
Las Vegas is slowly but surely returning to form after being pummeled during the recession. Gaming suffered, but so did non-gaming revenue from rooms, nightclubs, and restaurants, which represents more than half of Wynn's revenue. Like other operators, Wynn lost a lot of business but is slowly beginning to win it back in gaming and non-gaming. This is a big positive because Wynn cut costs as far as it could during the recession and it has a leveraged upside in any recovery. For example, in third-quarter 2012, Las Vegas revenue rose 11.8% but EBITDA grew 29.7% from a year earlier, so more money is flowing to the bottom line. To get an idea where these trends are headed, investors need to keep an eye on Las Vegas visitation levels and gaming revenue for the Strip. Las Vegas may not generate most of the company's revenue but it still contributes to the bottom line, and any improvement in Las Vegas from gaming or non-gaming is good for Wynn.
- Growth opportunities:
Once Wynn's Cotai resort is complete, the company will be out of major expansion opportunities for the first time in its history. This could very well change by 2016, but unlike Las Vegas Sands and Melco Crown, which are aggressively expanding, Wynn does not currently have plans to build another casino. Keep an eye on new gaming markets like Japan, South Korea, and the Philippines opening up in coming years as Wynn looks for growth. We know that Wynn has its sights set on Singapore, but the country will be closed to new gaming until at least 2017.
If Macau and Las Vegas continue to grow and the company finds some new growth opportunities, the stock will continue to perform well.