Wynn Resorts Warns of Fall in Q3 Las Vegas Profit
It cites hike in bad debt reserves, drop in winning share of money gambled
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It cites hike in bad debt reserves, drop in winning share of money gambled
Bloomberg
15 October 2008
Wynn Resorts, the biggest US casino company by market value, said that its third-quarter Las Vegas earnings will be worse than last year after it boosted bad debt reserves because of ‘global economic uncertainty’.
Wynn, founded by billionaire Stephen Wynn, attributed the decline to winning a lower percentage of money gambled and the need to set aside more money for gamblers who may not pay back loans.
Even with the decline, Wynn’s results are better than the ‘horror stories’ coming out of other casino companies in Las Vegas, according to analyst Robert LaFleur.
The results signal that Wynn, with its reputation as an exclusive gambling property, has seen its Las Vegas business deteriorate less than its rivals.
‘Certainly, the overall Las Vegas market seems to be much worse than Wynn,’ Robert LaFleur, an analyst at Susquehanna Financial Group, said on Monday.
Las Vegas Strip casino gambling revenue slid 6.7 per cent to US$4.21 billion this year through August as airlines cut back capacity and US consumers struggled with higher petrol and food prices, declining home values, job losses and the worst financial crisis since the Great Depression.
The casino company said that it ‘had a solid third quarter’ in both Las Vegas and Macau but future earnings could be affected ‘due to the global economic situation and the recently imposed travel restrictions in Macau’.
China has been increasing visa restrictions on some mainland residents travelling to Macau to limit growth in high-roller gambling. Macau revenue accounted for more than 50 per cent of Wynn’s revenue last year, up from 21 per cent in 2006, according to Bloomberg data.
In Las Vegas, results will range from an operating loss of US$2 million to earnings of US$2 million, compared with operating income of US$35.8 million a year ago, Wynn said on Monday.
Las Vegas earnings before interest, taxes, depreciation and amortisation and other items, or adjusted Ebitda, fell to US$68-72 million for the third quarter, from $93.2 million.
In Macau, adjusted Ebitda rose to US$103-109 million, from $92.8 million a year ago. Operating income rose to between US$57 million and US$63 million, from US$39.2 million. Wynn said that it also increased Macau’s bad debt reserves.
This is the second consecutive quarter that Wynn has unexpectedly released preliminary results. The company will announce its full third-quarter results on Oct 30 after US markets close.
Wynn Las Vegas slot machine gambling fell 11.9 per cent to US$853.8 million for the third quarter. Table game betting climbed 11.6 per cent to US$531 million, while the casino ‘hold’, or the amount that the company keeps, fell to 24.3 per cent, from 26.4 per cent.
Encore, the name of both Wynn’s second Las Vegas and Macau resorts, is ‘fully financed, remains on time and within the previously announced budget’, the company said. Wynn previously said that Encore Las Vegas would cost US$2.2 billion and open in December.
Wynn had about US$1.1 billion in ‘excess cash’ at the end of last month and US$4.9 billion of debt.