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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