Wynn Resorts, Limited (NASDAQ:WYNN) is finally starting to become the company investors have been waiting for since Wynn Palace was first announced in 2011. The $4.4 billion resort is now fully operational, and despite some construction surrounding the casino, Wynn can begin to ramp up operations.
There's also Wynn Boston Harbor, which will open in mid-2019 and add another domestic property to Wynn's portfolio. Once completed, Wynn will have four major resorts and could be churning out billions in cash each year. Wynn is finally a growth stock again, and that could pay off in spades for investors.
Wynn's impecable timing in Macau
The last two and a half years have been tough for Macau, but Wynn Palace opened at an opportune time for the region. VIP players are starting to return, which I noted last week, and since VIPs are Wynn's main market, it should bring additional revenue to the casino. And the opportunity is incredible.
Over the past year, Wynn Macau on the Macau Peninsula has generated $693 million in EBITDA, a measure of cash flow for a resort. Wynn Palace on Cotai should be in a more attractive location long term and the resort's larger footprint and amenities should mean it'll generate even more EBITDA than Wynn Macau. In total, it wouldn't be surprising if the two resorts generated $1.4 billion in EBITDA in 2017.
Wynn Las Vegas is also performing well as the Las Vegas market slowly grows. About $488 million in EBITDA in the past year is the most of any resort in Las Vegas, by a long shot, and the money will fund Wynn's expansion in Boston and the ongoing dividend.
A lot of value in Wynn's stock
Operationally, conditions are looking up for Wynn Resorts, and from an investment perspective, the stock looks fairly cheap. Let's assume Macau indeed generates $1.4 billion in EBITDA in 2017 and Wynn Las Vegas adds another $500 million for a total of $1.9 billion. If we multiply that by an enterprise value/EBITDA multiple of 10 (about the average at which we see gaming stocks trading), we get an enterprise value of $19 billion. Subtract $7.4 billion in net debt and the company's market cap should be about $11.6 billion. But the stock company is only worth $9.4 billion, meaning there's about 23% upside at today's stock price.
This doesn't even include the possibility of Macau growing in the future or the potential cash generated by Wynn Boston Harbor. When completed, it's 671 hotel rooms and 4,250 gaming positions could easily add $300 million to $400 million in EBITDA, adding as much as $4 billion to enterprise value.
The future looks bright at Wynn Resorts
Macau's return to growth could be a rising tide for all gaming companies. But if the VIP market grows more quickly than the mass market, Wynn Resorts would benefit the most due to its focus on high rollers.
And when you add that market trend to the completion of Wynn Palace, growth in Las Vegas, and the construction of Wynn Boston Harbor, you get a company on a steady growth path trading at a good value for investors. That's why I think the stock is extremely cheap at today's price.