Wynn Macau Earnings: Solid Recovery Across Segments, Further Uptick Into Third Quarter

Wynn Macau’s 01128 decent second-quarter sales recovery was largely in line with industry performance, with revenue and adjusted EBITDA reaching 66% and 72% of 2019 levels, despite renovation closures at its peninsula property. Management indicated further uptick across segments into the third quarter, with daily mass gaming volume in July 20% higher than 2019 levels, along with robust hotel occupancy and healthy retail sales. With transportation capacity continuing to recover, we expect Wynn Macau to extend this robust growth momentum in the second half. We have raised our 2023-25 forecasts for revenue by 9%-15% and for adjusted EBITDA by 7%-24% after lifting our 2023 industry gross gaming revenue, or GGR, to MOP 181 billion, or 62% of 2019 levels (up from 50% previously), as well as a higher nongaming revenue assumption. Meanwhile, we have already anticipated normalization of GGR in our longer-term profit forecasts during 2026-27. Accordingly, we have raised our fair value estimate for Wynn Macau to HKD 9.20 per share from HKD 8.60.

We think the shares are slightly undervalued as of market close on Aug. 10, with market concerns on the closure of junket VIP rooms, a 7% cut of gaming tables to 570, and potential dilution impact from convertible bond issuance largely priced in. As of second-quarter 2023, Wynn Macau’s share of VIP revenue fell to 25% of total GGR, down sharply from nearly half its gaming revenue mix during prepandemic 2019—the highest among Macao casinos. This is now in line with the 27% for the broader gaming sector. In addition, despite the fall of VIP revenue, Wynn Macau was still able to maintain a market share of 14.2% in the second quarter, largely consistent with its share of 14.8% in 2019. We think a migration of junket VIP clients to direct VIP and premium mass segments was the key driver, and Wynn Macau’s high-end image and luxury facilities make it more competitive in attracting premium clients.