A combination of executive change at Wynn Resorts (NASDAQ:WYNN) and a dramatically altered Macau VIP landscape could eventually compel the operator to sell its assets in the special administrative region (SAR), speculates an analyst.
In a note to clients earlier this week, CBRE analyst John DeCree says C-suite changes at the Encore operator open the door to potential consolidation with Wynn being buyer or seller.
With now a complete turnover in legacy management and a more opportunistic board, we could see Wynn begin to carve a new path and take advantage of the robust mergers and acquisitions environment as a buyer or seller,” said the analyst.
Last month, the company announced Matt Maddox is stepping down as chief executive officer at the end of January. He’ll be replaced by current CFO Craig Billings. Earlier this week, the casino operator said Julie Cameron-Doe is leaving Aristocrat Leisure to succeed Billings in Wynn’s top financial role.
Wynn Trying New Approach in Macau
Wynn Macau controls the eponymous integrated resort on the peninsula and Wynn Palace on the Cotai Strip. In a standard operating environment, the SAR accounts for approximately two-thirds of the US parent’s earnings before interest, taxes, depreciation and amortization (EBITDA).
However, the past two years have been far from typical for Macau operators. The effects of the coronavirus pandemic linger today in the form of travel restrictions and slow visa approval times. More recently, Alvin Chau, chairman and CEO of Suncity, the world’s biggest junket operator, was arrested, stoking speculation Macau’s VIP business — to which Wynn is highly levered — will never look the same.
CBRE’s DeCree notes Wynn Macau is planning to reduce its VIP exposure and focus more on mass and premium mass players, putting it in more direct competition with the likes of Las Vegas Sands (NYSE:LVS) and Galaxy Entertainment.
“Mass-market is the way forward for Macau and we still find reason to be encouraged by the long-term secular growth story of penetrating deeper into China to access more mass-market customers,” said the analyst.
Macau Sale Far-Fetched, But Not Impossible
Wynn has levers to pull outside of Macau to bolster EBITDA and revenue, namely Wynn and Encore Las Vegas, Encore Boston Harbor and its Wynn Interactive iGaming and sports wagering unit. The operator is also rumored to be interested in projects in other US metropolitan areas.
DeCree notes if those avenues don’t pan out to the company’s liking, “we believe the highly coveted Wynn assets could finally be saleable with a complete changing of the guard following the departure of outgoing CEO Matt Maddox.”
The analyst doesn’t mention potential suitors for Wynn Macau and Wynn Palace should those assets be put up for sale but if both hit the block, the list of interested parties is likely to be lengthy. Nor does he speculate on pricing, but it’s probable each would command several billion dollars in a sale.
Though he’s cautious on Macau equities in general, DeCree rates Wynn a “buy” with a $120 price target. That implies upside of 39 percent from current levels.
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