Wynn Earnings Drop 38.8pc as Beijing’s Travel Restrictions Bite
Beijing’s crackdown on mainland visits to Macau has begun eating into corporate earnings, with operating profit at the Wynn Macau falling at least 38.8 per cent in the quarter to September from the previous period, according to preliminary results released by the company yesterday.
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Neil Gough
15 October 2008
Beijing’s crackdown on mainland visits to Macau has begun eating into corporate earnings, with operating profit at the Wynn Macau falling at least 38.8 per cent in the quarter to September from the previous period, according to preliminary results released by the company yesterday.
Wynn Resorts estimated operating income at its 600-room Macau property at US$57 million to US$63 million, down 38.8 to 44.6 per cent from US$102.94 million in the previous quarter but up from US$39.22 million a year ago before a major casino expansion was launched.
VIP chip sales fell 18 per cent to US$13.3 billion from US$16.3 billion in the previous quarter, although it was unclear whether this resulted from a drop in the overall market or high rollers defecting to other properties amid a junket commission war.
The company won back a better than expected 3.1 per cent of chips sold for gross VIP winnings of US$412.3 million, down 14.5 per cent from the previous quarter.
Earnings before interest, tax, depreciation and amortisation (ebitda) at the Wynn Macau was estimated at US$103 million to US$109 million, down 29.7 to 33.6 per cent quarter on quarter but up 10.9 to 17.4 per cent from a year ago.
US billionaire Steve Wynn’s eponymous Macau property accounted for 61 per cent of companywide ebitda in the past 12 months, with his flagship 2,700-room Las Vegas resort making up the remaining 39 per cent.
The Macau ebitda decline stemmed in part from “an increase in bad debt reserves based solely on the current global economic uncertainty”, the company said.
Wynn Resorts will report finalised results for the quarter on October 30.
Compared with a record quarter in Macau in the three months to June, Wynn Resorts described the latest performance as “solid”, but cautioned: “We have very little visibility on future earnings because of the global economic situation and the recently imposed travel restrictions [on mainlanders visiting] Macau.”
Beijing’s travel restrictions are threatening to derail six years of post-liberalisation gaming industry expansion in Macau.
After surging 52.5 per cent in the first eight months, monthly casino revenue declined for the first time in nearly three years last month, falling 3.4 per cent from a year ago and 28 per cent from the previous month, according to unofficial data.
Since June, the central government has been reducing the ease and frequency with which mainland passport holders, including non-permanent Hong Kong residents, can travel to Macau.
The restrictions have progressively cut the number of times individual mainland travellers can visit Macau - from once a fortnight to once a month starting on June 1, then to once every two months starting on July 1.
In addition, from September 1, mainlanders travelling to or working in Hong Kong have been required to apply for a separate permit to visit Macau. Previously, they could visit on their Hong Kong permit.
The South China Morning Post reported earlier this month that by October 1, Guangdong residents are only able to visit Macau once every three months.
Shares in Wynn Resorts have been battered along with the rest of Macau casino operators but have not been sold down as sharply as most. The company’s Nasdaq-traded shares have fallen 43.49 per cent in the year to date and gained 6.54 per cent to close at US$63.37 each before yesterday’s announcement.