lot machine handle was us$ 1.1 billion for the first quarter of 2013, a 23.4 % decline from the equivalent period a year earlier. Win per slot unit per day was 7.1 % lower year-on-year at us$ 809, compared to us$ 871 in the first quarter of 2012.
Perhaps most importantly in terms of trend however, Wynn Macau’s adjusted property EBITDA (earnings before interest, taxation, depreciation and amortisation) in the first quarter of 2013 was us$ 330.7 million, up 14.1 % from us$ 289.8 million in the first quarter of 2012. That beat market consensus. The median figure for first quarter adjusted EBITDA based on estimates of five analysts polled by Bloomberg News was us$ 316 million.
Wynn Macau’s Q1 EBITDA. It is likely to be one of the strongest EBITDA performances among the Macau operators this reporting season suggested Karen Tang of Deutsche Bank in a report published before Wynn Resorts declared its global results on Thursday.
EBITDA is a measurement favoured by analysts as an indicator of how a company is performing relative to its peers and market rivals. Looking at net revenues in isolation is considered less reliable because it can be affected positively or negatively by the timing of line items such as receipts or expenditures.
Wynn Macau’s parent Wynn Resorts said it has approved a cash dividend for the quarter of us$ 1 per common share payable on May 23, to stockholders of record as at May 9.
Matt Maddox, CFO of Wynn Resorts, also confirmed to analysts during the first quarter earnings call that us$ 830 million in dividends for 2012 would be paid by Wynn Macau, with us$ 600 million of that payable to the parent company “over the next two months”. He added Wynn Resorts had “roughly” us$ 2 billion in bank cash, with 75 % of it held outside the United States – taken to be reference to the strong performance of the Macau operation.
“Although Wynn Macau remains largely capacity constrained until it can open its Cotai project in early 2016, the existing asset remains, in our view, the most aspirational in town,” said Union Gaming Research Macau in a note to clients.
“To that end the Encore portion of the property continues to experience a surge in high end (a.k.a. premium) mass market play, driving not only high margin high-visibility business but also seemingly driving hold rate higher.”
Win v. hold
While Union Gaming uses the term ‘hold rate’ here in a precise way, the issue of ‘win rates’ and ‘hold rates’ in the Macau gaming industry has recently caused some confusion, say a number of analysts. ‘Win rate’ is an indicator of how quickly the casino wins money from the player, but is dependent on play volume. If the casino wins us$ 12.8 from a player betting 100 hands per hour, than that’s an inferior win rate compared to the casino winning us$ 12.8 from the same player betting only 50 hands per hour.
“The hold rate on the other hand is a better description of how much the casino has actually won from the players,” says Ben Lee of IGamiX Management and Consulting, a gaming industry consultancy. “If a player checks in us$ 12.8 at the beginning of the game and walks away with us$ 10.3, the hold rate for the casino is 20 percent. This is irrespective of how many games were played to achieve that result.” He points out however that hold rates can be skewed when players buy in at the cage, not the table.
During Wynn Resorts’ first quarter earnings call Steve Wynn, chairman and founder of Wynn Resorts, raised that issue in relation to his high volume premium mass business at Encore Macau.
Wynn said that mass market hold rates in the casino industry had traditionally been measured by what cash goes in the table drop box, compared to what’s paid in table chips to the players. But he pointed out many premium mass players buy in at the cage, not the table. That’s largely because of the volumes of cash involved when playing on tables with minimum bets of us$ 257.6 or above.
Counting large amounts of cash at the table slows down the game, which neither the players nor the casinos like to see.
“…what's happened is, the customers are buying the chips at the cage, which does not enter into the drop,” Wynn explained to analysts. “So the hold percentage in the mass market and our Diamond Club, our premium mass market, is an irrelevant number. You should disregard that number now and pay only attention to the amount of the win because this absence of the chips purchased at the cage in the handle has skewed the numbers and made it look like we're holding an abnormal amount of money.”