Wynn Macau Ltd. (1128) reported first-quarter profit that beat analyst estimates as billionaire Steve Wynn’s casino drew more premium mass-market customers in the world’s largest gambling hub. The stock climbed.
Wynn Macau rose 4.1 percent to HK$31.80, the biggest gain since April 1, at the close in Hong Kong trading. The city’s benchmark Hang Seng Index rose 0.6 percent.
Adjusted property earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 16 percent from a year earlier to $384.3 million, according to a statement by parent company Wynn Resorts Ltd. (WYNN:US) That surpassed the $367 million median estimate of five analysts surveyed by Bloomberg News. Net revenue climbed 14 percent to $1.13 billion.
Wynn Macau, which is building the $4 billion Wynn Palace resort to add to its sole casino in the city, has been reallocating gambling tables to serve the so-called premium mass gamblers who bet in cash. They provide higher margins than the high rollers because they don’t require junket operators, who charge casino companies a commission to bring in VIP customers and arrange credits for their gambling trips.
“Property upgrades completed in 2013 and table shifts from junket VIP to premium mass gaming area has allowed Wynn to deliver three consecutive quarters of Ebitda expansion,” Aaron Fischer, a Hong Kong-based analyst at CLSA Ltd., wrote in a note today. The company’s planned renovation will sustain its growth, he said.
Bigger competitors including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27) are adding hotel rooms, shops and entertainment at their integrated resorts on Cotai, Asia’s equivalent of the Las Vegas Strip.
Betting on table games in the VIP segment, or VIP rolling turnover, at Wynn Macau rose 27 percent to $36 billion, while table-game revenue from the mass-market category climbed 24 percent to $300.7 million. Slot-machine wagers gained 25 percent to $1.4 billion.
High-stakes gamblers, or VIP bettors, typically wager more than $1 million on baccarat on each visit to Macau and bet using credit lines arranged by junket operators. Junket operators, also known as gaming promoters, typically draw commission which is equivalent to 1.25 percent the amount of bets made by the gambler they bring.
Macau VIP baccarat revenue growth slowed to 12.5 percent in the first quarter, ending five quarters of gains, Brian Miller and Tim Craighead, analysts at Bloomberg Industries, wrote last month. That coincided with a slowdown in China, where economic growth eased to 7.4 percent in the first quarter from 7.7 percent in the last three months of 2013.
Total gambling revenue in Macau, the only place in China where casinos are legal, rose 11 percent to 31.3 billion patacas ($3.92 billion) in April.
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