In a Tuesday note, CBRE analyst John DeCree said consensus that Wynn Macau will recover to 66% of 2019 revenue and 73% of 2019 EBITDA levels this year is too far below Macau-wide consensus of 78% revenue and 87% EBITDA recovery, noting that, “Historically, Wynn earns well more than its fair share in each of the markets in which it operates, including Macau.

“In 2019, Wynn exceeded its fair share in Macau across every metric,” he added.

Pointing to the Macau government’s recently announced distribution of table and slot machine supply, DeCree notes that Wynn Macau operated about 10.5% of total casino hotel room supply and 9.5% of total table supply in 2019 but grabbed 14.8% and 14.6% share of GGR and EBITDA respectively, out earning its fair share of rooms by 500+ bps and tables by 400+ bps.

Under the new 10-year concessions signed in December, Wynn will control 9.5% of hotel rooms and gaming tables, however DeCree said consensus that the company will earn an 11.5% share of revenue and EBITDA, representing about 200 bps of premium relative to its fair share, is less than half the company’s historical premium in 2019.

“Given the potentially smaller market, and much less VIP concentration, some operators may not utilize all their allocated table capacity. This could lead Wynn to earn an even greater premium to its fair share if it can successfully consolidate the highest value customer segments and maximize profitability per table and room, as we suspect it will,” DeCree wrote.

“While we appreciate the view that Wynn’s greater relative historical exposure to VIP could delay a strong recovery initially, we believe the company will be able to consolidate some of this legacy VIP business into its higher-margin premium mass market channels over the medium to long term.

“With the junket system upended, we expect the market to redistribute some of the legacy VIP business, particularly from under-resourced third-party service providers. When customers have more choice in where they play, Wynn should be able to leverage its best-in-market asset base and capture more than its fair share by consolidating some of the displaced higher-end customer segments.”

Wynn will also likely capture “a greater share of a smaller VIP market,” according to DeCree.

Aided by the Macau recovery, CBRE has maintained a BUY rating on shares in parent firm Wynn Resorts but increased its target price from US$115 to US$130.

by Ben Blaschke