Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) of Wynn Resorts, Limited (NASDAQ: WYNN) and all of its subsidiaries rated by Fitch at ‘BB’. Fitch also believes that the $4.2 billion Wynn Palace will outperform other casino developments on Cotai:
Fitch attributes $370 million of incremental EBITDA to Wynn Palace relative to the $100 million – $200 million Fitch attributes to competitors’ Macau projects. Fitch’s stronger confidence in Wynn Palace takes into account WYNN’s ability to transfer underutilized resources to Cotai from Peninsula including approximately 50 tables and $100 million of annualized labor costs. Fitch also factors in Wynn Macau’s relatively healthy mass market utilization statistics thoughout the recent downturn. Wynn Macau’s RevPAR is only 7% lower relative to the peak level attained in 1H14 and remains high relative to other Macau operators at $307 as of 1Q16. Mass market win per table per day declined by 38% during this time, which is decent considering the number of mass table games at Wynn Macau increased by 28% and market-wide mass market revenues declined by about 30%.
We expect WYNN to consolidate market share in Macau with its Wynn Palace opening in 3Q16 and grow revenues at a faster pace than the market in 2016 and 2017. Past that, Fitch expects mid-single-digit growth in Macau led by China’s rising middle class, the new capacity in Macau and infrastructure projects in and around Macau
Fitch’s forecast assumes that WYNN’s Macau gaming revenue market share increases to about 13% by 2018 compared to 10% in 2010 and that Macau’s market-wide gaming revenue will decline by 5% in 2016 and will grow 6% thereafter (assuming modest sequential growth in the mass market and leaving room for continued but milder weakness in the VIP segment). Fitch’s Macau forecast is conservative relative to WYNN’s middle-case scenario estimate discussed at April’s investor day of approximately $650 million in incremental EBITDA.
To read the whole ratings action, Fitch Affirms Wynn Resorts’ IDR at ‘BB’; Stable Outlook, go to the website of Fitch Ratings. In addition, check out our Macau Casino stock list page.
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