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Wynn Resorts Ltd.’s (WYNN - Analyst Report) second-quarter 2013 adjusted earnings of $1.51 per share missed the Zacks Consensus Estimate of $1.55 by 2.6% but beat the prior-year earnings of $1.38 per share by 9.4%. Earnings in the quarter received a boost from a 10.8% rise in the company’s adjusted property EBITDA.

Net revenue grew 6.3% year over year to nearly $1.33 billion, driven by the company’s growing Las Vegas business. However, revenues were lower than the Zacks Consensus Estimate of $1.34 billion by 0.7%.

Adjusted EBITDA increased 10.8% year over year to $425.7 million, driven by a 65.6% rise in the EBITDA in Las Vegas operations.  

Macau Operations

Wynn reports its Macau table games results under two categories: the VIP segment and the mass market segment.

Wynn Macau’s revenues were up 2.6% year over year to $930.9 million in the quarter, benefitting from the strong mass market business. Table games win in the mass market category was $217 million, up 8.5%. Moreover, the mass market table games win rate was 34.6%, higher than the year-earlier rate of 29.8%.

The table games turnover in the VIP segment plunged 1.6% from the prior-year period to $29.9 billion due to the sluggish VIP market. However, VIP table games win rate as a percentage of turnover was 2.94%, higher than the year-ago level of 2.79%. It has also exceeded management’s expected range of 2.7%–3.0%.

Revenue per available room (RevPAR) was up 5% to $300 in the second quarter, gaining from the 500 basis points (bps) improvement in the occupancy rate to 95.5%, offset by a 1% decline in average daily rate (ADR). Gross non-casino revenues came in at $99.9 million, up 3.3% year over year.

Wynn Resorts is engaged in developing a full-scale integrated resort on the Cotai land in Macau, which is slated for a 2016 opening. Currently, the company expects the project to cost around $4.0 billion. The company spent around $113.3 million on the Cotai project in the quarter.

Las Vegas Operations

Wynn Resorts’ revenues from Las Vegas operations witnessed an upside of 16.2% year over year to $401.4 million as net casino revenues increased 44.7% from the prior-year period to $142.6 million. Moreover, gross non-casino revenues climbed 3.9% annually to $302.1 million, benefited from the higher revenue gains from the hotel, food and beverage as well as retail segments, offset somewhat by lower entertainment sales.

During the quarter, RevPAR was up 4.7% benefitting from a 5.6% increase in ADR, partially offset by a 70 bps decline in occupancy rate. In the second quarter, EBITDA margin expanded 10.1 percentage points to 33.8%.

Our Take

Although the company’s earnings increased year over year, it failed to meet the estimates. Moreover, weak VIP business in Macau is a huge matter of concern.

Further, the company’s upcoming project at Cotai is expected to face extreme peer pressure from the U.S.-based casino operator, Las Vegas Sands Corp. (LVS - Analyst Report), which has already established its business in Cotai Strip.  

However, this Zacks Rank #3 (Hold) company has gained from its flourishing business in Las Vegas in the recent times and the strong mass market category in Macau.

Some other casino operators worth looking at the current level include Monarch Casino & Resort Inc. (MCRI - Snapshot Report) and Full House Resorts Inc. (FLL - Snapshot Report). While Monarch Casino & Resort carries a Zacks Rank #1 (Strong Buy), Full House Resorts holds a Zacks Rank #2 (Buy).

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