International edition
July 27, 2021

Fitch Ratings estimates the coronavirus crisis could wipe out $3.3B in cash flow for the six Macau operators

Wynn is losing up to $2.6M a day due to Macau casinos closure

Wynn is losing up to $2.6M a day due to Macau casinos closure
In Macau, operating revenues from Wynn Palace were $590.0 million for the fourth quarter of 2019, a 20.3% decrease from $740.6 million for the fourth quarter of 2018.
Macau | 02/07/2020

Analysts warn it’s not clear the gaming floors will reopen at the end of the current suspension, and Chinese gamblers may still stay away longer if travel seems risky or if the economic hit from the virus tightens their spending. Wynn brought in $6.6 billion in operating revenue for the full year of 2019, roughly 70% of which came from two properties in Macao. It represents a decrease of 1.6%, or $106.6 million.

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ome gaming operators have already detailed their losses due to Macau government decision to close casinos for at least two weeks after one of Macao's confirmed coronavirus patients was discovered to have worked in the gambling industry. Wynn Resorts Ltd. said Feb. 6 that its Macau outpost, which accounts for about 75% of its revenue, is down $2.5 million a day. Melco Resorts & Entertainment Ltd. said it would step back from a $1.2 billion deal to take a 20% stake in Australia’s Crown Resorts Ltd. and reassess all non-core investments this year.

Overall, Fitch Ratings estimated that the crisis could wipe out $3.3 billion in cash flow for the six Macau operators, including Wynn, Melco and two other U.S.-listed companies with Macau businesses, Las Vegas Sands Corp. and MGM Resorts International, Bloomberg reports.

The depth of the losses, though, depends on how long it takes to bring the coronavirus under control. The city’s $36 billion industry is highly dependent on Chinese visitors; during the recent Lunar New Year holiday, tourism from the mainland fell by roughly 80%, and that was before the casinos closed. “It hurts that we still need to pay for the staff and other fixed costs,” said U. Io Hung, founder of Pacific Intermediary Co., which makes travel arrangements and provides credit and high-stakes games for big-money gamblers from China. “The only work I have done lately is to keep canceling the hotel and flight bookings for my clients.”

It’s not clear the gaming floors will reopen at the end of the current suspension, Fitch Solutions Macro Research warned in a report published Feb. 5. Even if they do, Chinese gamblers may stay away longer if travel seems risky or if the economic hit from the virus has everyone tightening their spending. In its report, Fitch noted “a significant risk” of an extended closure of the casinos and forecast the city’s economy would shrink 3.8% this year after a 3.2% contraction in 2019.

The renovations and development of resorts are critical to Macau’s broader efforts to reinvent itself with more family-friendly and middle-market offerings. Tourists and casual gamblers accounted for more than half of Macau gaming revenue for the first time last year, and the casinos have been eager to broaden their appeal.

Wynn Resorts 2019 Q4 and full-year financial results

Wynn CEO Matt Maddox disclosed the costs on the company's earnings call Thursday, saying that "while the casino is closed, our operating expense burn rate is roughly $2.4 [million] to $2.6 million a day." The company employs 12,200 people in Macao.

Wynn has more at stake than other major casino operators. The company "has the highest relative exposure" to events in Macao, compared to rivals such as Sands or MGM, mainly because it has typically generated more of its overall revenue there, according to analysts at Moody's Investors Service, CNN reports. Wynn brought in $6.6 billion in operating revenue for the full year of 2019 — roughly 70% of which came from two properties in Macao.

Wynn shuttered its casino operations at midnight Wednesday, and since then executives have been in "daily conversations" with authorities about efforts to contain the outbreak, Maddox said. He kicked off the earnings call Thursday by providing an update on the recent events in Macao, saying the company is "currently focused almost solely on the health and safety of our employees, our customers and the Macao community at large."

In 2019, operating revenues decreased 1.6%, or $106.6 million, to $6.61 billion compared to 2018. Operating revenues were $1.65 billion for the fourth quarter of 2019, a decrease of 2% from the same period of 2018. Net loss attributable to Wynn Resorts was $72.9 million, or $0.68 per diluted share. Operating revenues decreased $150.6 million, $28.0 million, and $24.9 million at Wynn Palace, Wynn Macau, and its Las Vegas Operations, respectively, in Q4. The drop was partially offset by operating revenues from Encore Boston Harbor of $169.3 million.

Full-year Adjusted Property EBITDA decreased 11.2%, or $229.0 million, to $1.82 billion, compared to the prior year. Adjusted Property EBITDA was $443.1 million for the fourth quarter of 2019, a decrease of 11.3%. 

In Macau, operating revenues from Wynn Palace were $590.0 million for the fourth quarter of 2019, a 20.3% decrease from $740.6 million for the fourth quarter of 2018. VIP table games win as a percentage of turnover was 3.07%, slightly above the expected range of 2.7% to 3.0% and below the 3.25% experienced in the fourth quarter of 2018. Table games win percentage in mass market operations was 25.2%, above the 23.6% experienced in the fourth quarter of 2018.

Operating revenues from Wynn Macau were $525.4 million for the fourth quarter of 2019, a 5.1% decrease from $553.4 million for the fourth quarter of 2018. VIP table games win as a percentage of turnover was 3.27%, above the expected range of 2.7% to 3.0% and above the 2.86% experienced in the fourth quarter of 2018. Table games win percentage in mass market operations was 20.3%, consistent with the 20.3% experienced in the fourth quarter of 2018.

Operating revenues from Las Vegas Operations were $368.8 million for the fourth quarter of 2019, a 6.3% decrease from $393.6 million for the fourth quarter of 2018. Table games win percentage was 17.4%, below the property's expected range of 22% to 26% and below the 22.4% experienced in the fourth quarter of 2018.

This month, Wynn is opening its meeting and convention expansion at Wynn Las Vegas. Once open, the space will feature approximately 217,000 square feet of incremental state-of-the-art meeting and convention space (430,000 square feet of gross space), which will nearly double our group footprint in Las Vegas. The total project budget, including the redesigned golf course that reopened in October 2019, is estimated at approximately $425 million.

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