Wynn Macau can generate around US$917 million in Adjusted EBITDAR in FY23, outperforming Fitch Ratings’ original base case as well as its bull case, the agency said.
In a Monday note following publication last week of Wynn Resorts’ 2Q23 results, Fitch described Wynn Macau bonds as the most attractive way to play the Macau recovery story because they offer the “most attractive yield” among the three US operators in the region – Wynn, Sands China and MGM China.
This, they explained, was due to Wynn Macau surprising on the upside in Q2, with Macau’s general recovery trajectory complemented by greatly improved margins as the market shifts from VIP to mass.
As reported by IAG, Wynn reported mass drop per day reaching 120% of pre-COVID levels into July, while Adjusted EBITDAR of US$246 million in 2Q3 was back to 72% of the same period in 2019.
Noting the improvement in mass drop, Fitch said, “We suspect this is partly due to the collapse of the junket-sourced VIP segment which has funnelled more customers into the mass segment.
“We now forecast Wynn Macau can generate ~$917 million of 2023 adjusted EBITDAR.
“This exceeds both our original base (US$632 million) and bull (US$892 million) cases. The increase reflects Wynn Macau’s meaningful margin improvements (2Q23 EBITDA margins were up 300 bp vs 2Q19) reflecting a shift in mix to the more margin friendly mass market, higher than expected business volumes, and improved cost efficiencies.”
The agency added that it maintains an Underperform recommendation on Wynn Las Vegas but Outperform on Wynn Macau.
“We continue to prefer playing the structure through the Wynn Macau bonds which offer the most yield and expect additional recovery in Macau will remain supportive of that trade,” Fitch explained.
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