Analysts from JP Morgan indicate that Wynn Macau’s 4Q23 EBITDA margin was near its 10-year highs thanks to ‘strong cost control and growth in mass.’
In the recent investment memo issued after Wynn Resorts’ 4Q23 earnings announcement, analysts DS Kim, Mufan Shi, and Selina Li note that Wynn Macau’s property EBITDA rose 16 percent quarter-over-quarter to $297 million, standing at 85 percent of pre-COVID levels. “This is partly helped by favorable VIP luck ($7 million), but even its hold-adjusted EBITDA ($290 million) came in beyond estimates with solid details, particularly on the margin side.”
According to calculations, the company’s EBITDA margin improved to 32.6 percent, a significant 140 basis points above the pre-COVID level. JP Morgan notes that opex edged up 4 percent quarter-to-quarter to $2.56 million per day. The figure is still 14 percent below $3 million per day in 4Q19. Despite this, Wynn Macau’s revenue increased 10 percent during the period.
On the other hand, the investment memo mentions that Wynn’s reinvestment rate dropped 140 basis points quarter-to-quarter despite the fairly steady mix.
Analysts believe the result should alleviate investor concerns about rising competition in premium mass, despite new supplies from Galaxy’s Phase III and Studio City Phase 2. Moreover, the management expects “no major uptick in its OPEX” for some time until a new major facility (e.g., an event center, etc.) opens in a few years.
Wynn’s GGR grew 12 percent in 4Q23 from the previous quarter, with similar growths in both segments. This is versus the industry’s 8 percent quarterly growth.
Mass GGR increased 11 percent quarter-to-quarter to be 17 percent above pre-COVID levels, while the industry has an average of 11 percent quarterly growth and 5 percent above pre-COVID levels.
JP Morgan notes the result was better than most feared, and VIP (albeit much less important) also outperformed the industries by 11 percent quarter-to-quarter versus the industry’s mid-high-single-digit growth on its estimate. “These are very respectable considering the ramp in new supplies by the peers.”
Dividend resumption expected for 2025
No clarity was given on the timeline with respect to resuming dividends. However, JP Morgan expects the timing of payment to be next year, as FY24 dividends are to be paid in 2025.
On the earnings call, the management remarked that “…we’ll consider the initiation of dividends as the recovery progresses…”, or “… stay tuned, as we’re looking very closely at it and figuring it out in due course…”.
Wynn Resorts CEO Craig Billings mentions that the dividend resumption relies on Macau’s leverage profile.
Hong Kong-listed Wynn Macau has not declared a dividend since 2020. Meanwhile, its parent company, Wynn Resorts, has declared a cash dividend of $0.25 per share, payable on November 30th last year.
