MGM MGM Resorts International

The world's third-largest casino operator in terms of revenue, Wynn Resorts Ltd. (WYNN) reported fourth quarter 2011 adjusted earnings of $1.55 per share, breezing past the Zacks Consensus Estimate of $1.26 and the prior-year quarter earnings of 91 cents. On a GAAP basis, earnings per share was $1.52 versus 91 cents in the comparable quarter last year.

Net revenue climbed 8.6% year over year to $1,343.9 million, driven by solid business in Macau and Las Vegas.

For full year 2011, thecasino operator reported an adjusted net income of $701.1 million or $5.58 per share compared with $261.0 million or $2.11 per share in the prior-year period. For 2011, net sales rose 25.9% to $5,269.8 million.

Macau Operations

Net revenue at Wynn Macau was $995.5 million in the quarter, up 9.1% year over year, driven by an increase in slot machine handle and in both VIP table and mass market table games.  

The table games turnover in the VIP segment rose 7.3% from the prior-year period to $29.7 billion. VIP table games win in the quarter was 3.18% based on turnover, above the expected range of 2.7% to 3.0% as well as the year-ago level of 3.15%.

Table games in the mass market category jumped 4.4% year over year to $692.3 million. The mass market table games win rate was 30.4%, which was higher than the expected range of 26% to 28% and 26.0% recorded in the year-earlier quarter.

Average daily rate (ADR) at Wynn Macau was $322, up from $303 in the year-ago quarter. The property’s occupancy level also leaped to 94.2% from 92.3% in the prior-year quarter.

Non-gaming revenues at Wynn Macau perked up 14.6% to $106.0 million from the prior-year quarter, aided by solid performance across all non-casino segments. Including Encore, Wynn Resorts currently boasts 504 tables (295 VIP tables, 198 mass market tables and 11 poker tables) and 930 slot machines in Macau.

Las Vegas Operations

Wynn Resorts’ revenue from Las Vegas operations grew 7.2% year over year to $348.4 million. Net casino revenue was $145.8 million, rose 4.7% from the prior-year period. Gross non-casino revenue crept up 6.8% year over year to $246.6 million, buoyed by improved revenues from all non-gaming segments.

With the global economy recovering gradually, Wynn reported an upside in room revenues, which jumped 11.7% year over year to $85.3 million. ADR also rose 6.3% to $250, but occupancy fell 3.3% to 79.1%. During the quarter, Wynn had 1.0% of total rooms unavailable because of an air rebalancing project, versus 9.0% of the rooms due to renovations in the fourth quarter of 2010.

Balance Sheet

At the end of 2011, Wynn Resorts’ total cash balance was $1.3 billion. Total debt outstanding was $3.2 billion, including obligations of approximately $2.6 billion for Wynn Las Vegas and $628.0 million for Wynn Macau.

Our Take

We remain positive on Wynn Resorts’ strong brand equity and strategic positioning to command a premium rate relative to the overall gaming and lodging industry. Moreover, we remain encouraged by the company’s healthy balance sheet, relatively low capital requirements and ability to execute in a difficult operating environment. With strong momentum in Macau, we expect the company’s earnings to grow going forward. Additionally, Wynn Resorts’ has started working on the budget and project scope for the sole Cotai project in the pipeline that is further expected to boost its market share in Macau.

On the flip side, the competitive environment at both at Macau and Las Vegas is heating up. The company faces stiff competition from peers like Las Vegas Sands Corp. (LVS) and MGM Resorts International (MGM).

Accordingly, we have a Zacks #4 Rank (short-term Sell rating) on the shares. We also reiterate our long-term Outperform recommendation.

 
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