On its fourth-quarter earnings call on Thursday (13 February), Wynn shared year-on-year revenue growth at Wynn Palace and its Las Vegas properties while revenue fell at Encore Boston Harbor and Wynn Macau.
Wynn CEO Craig Billings focused the call on the Al Marjan project in the UAE from the start, saying that the company will continue to buy back company shares “until we believe that Wynn Al Marjan is appropriately reflected in our valuation”. He went on to say that the company believes the “return profile on these purchases is meaningful”.
The massive project, in what Billings said he believes will be a $3billion-$5 billion market, is still on track for a March 2027 opening. Billings said the hotel tower is built to the 35th floor and there are now 4.6 million square feet of “concrete and steel in place”.
Second licensee? Wynn doesn’t think so
Wynn is at about the halfway point of its build, which is relevant from the standpoint of other potential projects in the UAE. Asked what he thinks about the “pace of future competition” Billings appears to be bullish as a first-to-market mover.
MGM chief executive Bill Hornbuckle said in September his company filed for a UAE licence in Abu Dhabi. No other entities have publicly announced interest or action in the UAE.
“We don’t believe that every emirate will avail themselves of potential licences, by any means, actually,” Billings said. “As we keep our ear to the ground with respect to what is going on, we don’t believe that there is even a deal struck, frankly, for a second licence. Could be wrong, but we think we have pretty good intelligence.”
Billings said it takes at least four years to design and build an integrated resort and Wynn is well positioned.
“The precedent in our industry if you look around regional markets in the US, actually a first-to-market [gets] a lot of sticky database and being able to weather a new entrant,” he said. “Beyond that, again, we provided the projections that we provided for Al Marjan assuming a second property. And in fact, I don’t think we would be all that fussed if there was a second property because we believe in the clustering effect and we believe that it would be good for the industry. But as of now, we don’t see line of sight on that potential second licence.”
Wynn in London seeking UAE customers
CFO Julie Camandot said the company recently completed a $2.4 billion (£1.91 billion/€2.33 billion) financing package for the project. She said it is the “largest hospitality financing for any project in the UAE”. The company invested $99 million in the fourth quarter.
Wynn during the quarter purchased British luxury brand Aspinal in London’s Mayfair neighbourhood as a way to begin to engage potential customers for Al Marjan. In his opening remarks, Billings called it a “small but strategic asset in central London where many of our future Al Marjan customers” spend a meaningful amount of time.
During the question-and-answer period, he expanded, saying that Aspinal will ultimately “report up” to Al Marjan. He said taken together, 40% of the world’s millionaires are among the 2.5 billion people who live in those areas. Billings indicated there may be similar or more unexpected acquisitions going forward.
Growth in Las Vegas?
Wynn owns a vacant piece of land in Las Vegas, where the New Frontier Casino and Resort stood. The 34-acre parcel remains undeveloped. Billings shared general thoughts when asked about when and what the company might build there.
“The timing has to be right for our global business,” Billings said. “We have to think about the entire portfolio and make sure that we can execute and execute it well. The market is just now absorbing the two openings over the last four to five years. We want to address an adjacent customer base and we obviously don’t want to cannibalise ourselves and create Wynn Las Vegas 2.0. We need to make sure that we have our market positioning right.
“We’ve done early studies and early doodles, if you will, on what we think that land could hold. At this point, I’d say, stay tuned. But we’d appreciate it if everyone was as focused on Wynn Al Marjan as we are because that is quite the opportunity.”
A look at the numbers
During the fourth quarter, Wynn bought back 2.14 million shares for $200.3 million. Billings called the buyback a long-term play based on the company’s faith in the ultimate success of the UAE project.
Wynn reported $1.84 billion in revenue, beating analyst estimates of $1.77 billion. Its reported adjusted EPS was $2.42 versus estimates of $1.22.
The company finished the fourth quarter with $2.43 billion in cash against $10.54 billion in debt. It announced at 25-cents-per-share cash dividend for anyone owning stock as of 24 February. The dividend will be paid out on 5 March.
Wynn stock closed at $80.47 on Thursday. It shot up to $85.51 just ahead of the call before dropping to $81.10 by 8pm ET.
Original article: https://igamingbusiness.com/casino/wynn-beats-estimates-q4-uae-al-marjan/
