Macau success lifts Wynn Resorts’ quarter

Although quarterly earnings for Wynn Resorts Ltd. reversed a year-earlier loss, company Chairman Steve Wynn lectured investors Monday on how Las Vegas history might be used to carefully judge the growth of gambling in Macau.

Booming business at Wynn Las Vegas and Wynn Macau drove the company’s results for the first quarter ended March 31, fueling boosts in both profits and revenue.

Wynn Resorts posted net income of $58.4 million, or 54 cents per share in the quarter. Without certain adjustments, the company would have reported net income of $72.6 million or 67 cents per share. A year ago, Wynn Resorts lost $11.4 million or 12 cents per share. Analysts surveyed by Thomson Financial had forecast first-quarter earnings of 55 cents a share for Wynn Resorts.

Wynn Macau opened in September and free-spending gamblers helped boost the parent company’s net revenues to $635.3 million during the first quarter. A year ago, without its Chinese casino, the company’s net revenues were $277.2 million.

“To my investors, use the results we see for this past quarter in the most constructive and positive way in what to expect for the future,” Wynn said during his company’s conference call with analysts and investors.

At Wynn Las Vegas, the casino’s cash flow, defined as earnings before interest, taxes, depreciation and amortization, jumped 37.1 percent to $111.2 million. Meanwhile, casino revenues were $173.1 million, compared with $126.5 million a year ago. Wynn Macau generated revenues of $304.6 million and a cash flow of $79 million.

But Wynn, who is building a second resort in Las Vegas while planning an expansion to his Macau casino and developing 52 acres in the enclave’s Cotai Strip region, said being the biggest operator doesn’t always translate into success.

Wynn’s Macau holdings will be dwarfed in size compared with the operations planned by Las Vegas Sands Corp., which operates the Sands Macau and is opening the $2.4 billion Venetian Macau this summer. Las Vegas Sands is also developing seven hotel-casinos on the Cotai Strip.

Wynn has submitted plans to the Macau government for his Cotai Strip location while an expansion to Wynn Macau will be completed by its first anniversary, giving the resort 470 table games and 1,400 slot machines. Plans for Wynn Diamond Club, a hotel-casino addition to Wynn Macau, is expected to be unveiled then.

“Still, size does not matter,” Wynn told investors. “Quality determines more to the outcome in a highly competitive market. The public has a far more discriminating perspective than we give them credit for.”

Wynn said just because Macau is expanding so quickly, doesn’t mean every new resort and operator will be successful. He said Las Vegas history, where not every new resort has been successful, could be a good road map for those judging the future earnings in Macau.

“We in this company do not take tomorrow for granted,” Wynn said. “We need to be conservative with this unprecedented demand for construction (in Macau). Hundreds of (gaming) tables are being added at our neighboring casinos.”

Wynn is also expanding in Las Vegas. Construction of the $2.1 billion Encore is proceeding with the opening of the 2,034-room hotel-casino expected to take place in early 2009. On the conference call, Wynn didn’t give a date for announcing redevelopment plans for the golf course land behind Wynn Las Vegas, hinting that it might take place after MGM Mirage’s $7.4 billion Project CityCenter opens in 2009.

Wynn Resorts shares fell 67 cents, or 0.65 percent, Monday to close at $101.85 on the Nasdaq National Market. The company announced earnings after the regular market session ended, but shares initially jumped more than 5 percent in after-hours trading.

Deutsche Bank gaming analyst Bill Lerner had cautioned investors that Wynn shares were volatile and were not necessarily an accurate reflection of company earnings.

“We would remind investors that Wynn is a major development company with numerous projects and that earnings per share estimates are subject to a number of factors, and is a less relevant proxy for the health of the business at this stage,” Lerner said. “We believe that is still early in the game for Wynn and that there are a number of initiatives that could provide an incremental upside.”

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