Stifel On Wynn: Macau 'Great Unknown,' But Don't Forget About Boston

• Wynn Resorts, Limited WYNN shares have plummeted 64 percent year-to-date, and are trading close to the lower-end of their 52-week range of $52.26 - $192.45.
• Stifel’s Steven M. Wieczynski maintained a Hold rating on the company.
• While there is lack of clarity around developments in the Macau market, Wieczynski said that Boston and Las Vegas seemed to be on track.

Analyst Steven Wieczynski mentioned the key takeaways from the meeting with Wynn Resorts’ management:

Macau Remains the Great Unknown

While the management has confidence on the long-term fundamentals of the Macau market, there is lack of visibility into the near-term prospects. The company indicated that the VIP segment had still not stabilized.

“The issue is not one of supply but more an issue of demand and when that demand reaccelerates remains unknown…Gaining share once the Palace opens next year is a top priority and they believe gaining share will be achievable.”

Boston Shaping Up

Wynn Resorts indicated that preparation for construction would begin in Boston around October 1, and full construction could be underway early next year. Once full construction begins, the company expects a 24-30 month build out.

“They continue to expect a solid return from their investment given what they are seeing in other “regional” markets. They continue to stick with their ~$300M in EBITDA projection once fully ramped,”

Las Vegas Chugging Along

Wynn Resorts said that its business in Las Vegas is “healthy and comfortable.” Although the baccarat segment remained soft, the LV assets continue to generate improved cash flows.

“2Q15 marked a record quarter for non-gaming revenues in LV and management guided for 5-7% ADR improvement in CY15 and CY16. Management believes they will have ample room to push rates higher, especially midweek rates.”

While many investors are concerned about the company’s balance sheet and possible liquidity issues, Wynn Resorts continues to have $1.2B in cash and believes they would be able to keep the balance higher than $1B for a while.

“Obviously they would like to keep the $0.50 quarterly dividend in place but if the Macau market erodes further then management would reevaluate their dividend plan.”