Deutsche Bank has trimmed Wynn Macau’s 2Q24 forecast due to market share loss to rival Galaxy Entertainment.
In its latest update before the release of 2Q24 results, analysts note that while Macau’s gross gaming revenue (GGR) outperformed forecasts for 2Q24, Wynn Macau experienced a modest market share loss. This was ‘largely attributed to Galaxy following the openings of Andaz and Raffles Towers and a promotional push from the operator, which weighed on results.’
Andaz and Raffles, located in the integrated resorts of Galaxy Entertainment, were launched last year, adding hundreds of hotel keys to the operator.
As a result, the brokerage trimmed Wynn Macau’s property-level forecasts to account for a lower-than-previously-expected market share in the period. Wynn Macau’s market share for 2Q24 is expected to be in the range of 13-13.5 percent, down from 14 percent in 1Q24 and roughly in line with the year-over-year period.
The updated property EBITDA forecast of $295 million compares to the prior forecast of $310 million, also representing an 8 percent decrease from the 1Q24 hold-adjusted result.
In explanation, the investment bank notes that the decline is primarily due to three factors: a roughly $110 million sequential contraction in Macau’s market GGR, an expected 50-100 basis points slip in market share, and slightly higher non-gaming tax-related operating expenses.
Analysts from Deutsche Bank also mention that Wynn’s management noted a 30 percent increase in Macau’s mass drop in April compared to April 2019, with hotel occupancy during the period at 99 percent. Meanwhile, the Golden Week mass drop was up 30 percent compared to the same period in 2019. In this context, the brokerage believes that ‘the mass drop trends held reasonably firm over the balance of 2Q24.’
Additionally, non-gaming tax-related operating expenses in the period are estimated to be up 2 percent quarter-over-quarter, relative to the 3 percent sequential growth in 1Q24.
It is also worth recalling that, as part of its concession proposal to the Macau SAR government, Wynn committed to investing $2.2 billion over 10 years in a mix of capital and operational expenditures.
Deutsche Bank notes that Wynn expects to spend $350 to $500 million in total over the 2024/2025 period related to the concession requirement.
