Wynn Macau Ltd. (1128), the unit of billionaire Steve Wynn’s Las Vegas-based casino company, rose to the highest in a year in Hong Kong trading after reporting a 19 percent increase in first-quarter profit.
Wynn Macau shares climbed as much as 4.3 percent, headed for the highest close since May 3. Net income rose to $249 million in the three months through March on increased business from middle-class gamblers, the company said in a statement to the Hong Kong stock exchange. Revenue rose 4.4 percent to $992.1 million.
Casino operators in Macau, the world’s biggest gambling hub, have been adding shopping malls and entertainment shows to woo middle-class visitors who provide greater margins. An increase in hotel rooms and improved rail connections helped boost tourist numbers from China.
“Mass visitation and gross gaming revenue have already likely begun to benefit from the completion of the high-speed rail from Guangzhou to Macau,” said Anil Daswani, a Hong Kong- based analyst at Citigroup Inc.
Property earnings before interest, taxes, depreciation and amortization, or property Ebitda, rose 14 percent to $330.7 million in the period. That compares with the $316 million median of five analyst estimates compiled by Bloomberg News.
Wynn Macau traded up by 3.2 percent at HK$24.05 as of 11:02 a.m. in Hong Kong, while the benchmark Hang Seng Index rose 0.9 percent. The stock has gained 15 percent this year, compared with a 0.2 percent decline for the index.
Winnings at “mass market” table games grew 14 percent to $243.1 million, the company said.
Betting on high-stakes tables fell 15 percent to $28.4 billion, and the win rate as a percentage of betting by so- called VIP gamblers rose to 3.14 percent, higher than last year’s 2.59 percent.
High-stakes gamblers made up more than two-thirds of Macau casino revenue last year. Their spending started to pick up in March as the Chinese economy improved, Citigroup’s Daswani said. VIPs cut spending last year after a slowdown in the world’s second-largest economy.
Wynn Macau has one casino in Macau. It faces rising competition from larger rivals including Sands China Ltd. (1928), Galaxy Entertainment Group Ltd. (27) and Melco Crown Entertainment Ltd. (MPEL:US) which have been expanding their resorts on the Cotai strip, a piece of reclaimed land in Macau envisioned to be Asia’s equivalent of the Las Vegas Strip.
“Its revenue growth is less than that of the market in Macau, likely due to new competition on Cotai,” Tim Craighead, a Hong Kong-based Bloomberg Industries analyst said.
The company started construction of a Cotai casino in February and expects to open the resort in the first half of 2016. The total budget for the project will be $3.5 billion to $4 billion, Wynn Macau said.
Citigroup raised its 2013 Macau gross gaming revenue growth estimate to 15 percent from 12 percent previously. Casino revenue in Macau, the only place in China where casino gambling is legal, jumped 14 percent to $38 billion last year.
Wynn Resorts (WYNN:US)’s first-quarter net income rose 44 percent to $203 million, or $2 a share, from $140.6 million, or $1.23, a year earlier, the Las Vegas-based company said in a statement.
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