20141029-美银美林-3Q14_results_beat_by_3__11页_570kb

Wynn Macau 3Q14 Results Summary

Core Financial Performance

• Net Revenues: US$942mn, down 5.5% YoY and 1.9% QoQ, but beat estimates by 2%.
• Property EBITDA: US$326mn, down 1.1% YoY and up 6.6% QoQ, exceeding both the analyst's and consensus estimates by 3% and 4%, respectively.
• Margins: Remained solid at 34.5%, up 155bps YoY and 260bps QoQ, beating estimates by 45bps.
• VIP Revenues: Declined by 24.5% YoY to US$696.4mn, but the mass market showed strong growth with a 36.4% YoY increase.
• VIP Rolling Chip Volume: Down 17.4% YoY to 25,050mn, with a slight decline of 0.7% sequentially.
• Mass Market Revenues: Increased by 1.2% sequentially and 36.4% YoY to US$327.0mn.

Conference Call Highlights

• Margins Stability: Margins in the mass market remained constant over the last three quarters, despite concerns about competition.
• VIP vs. Junket: Direct VIP business outperformed junket business with flat turnover YoY and steady collections.
• Cotai Project: Wynn Palace is on schedule to open in 1H 2016, with total capex increasing by US$56mn to US$4.1bn.
• Dividend Policy: Wynn's parent announced a 20% increase in its 3Q regular dividend to US$1.50/share and an additional cash dividend of US$1.00/share.

Investment Analysis

• Price Objective (PO): Raised slightly from HK$31.70 to HK$31.80, implying a 19% upside from the current price of HK$26.75.
• Valuation Metrics:
  • EV/EBITDA: 10.3x (excluding Cotai), 16.7x (including Cotai).
  • P/E Multiple: 23.5x (2015E), 22.6x (2016E).
  • Dividend Yield: 5.5% for both 2014E and 2015E.
• Buy Rating: Reiterated due to organic growth resuming to double-digits, a 4% yield in 2013E or 3% in 2014E, and the premier brand status.

Key Financial Projections

*Free Cash Flow Yield is based on adjusted figures.

Financial Structure

• Net Debt: Increased to US$5,272mn in 2014E, with a net debt-to-equity ratio of 73.2%.
• Total Liabilities: Rose to US$27,219mn in 2014E, while Total Equity dropped to US$7,198mn.
• Total Assets: Grew to US$34,416mn in 2014E, with Property, Plant & Equipment increasing to US$18,161mn.
• Cash & Equivalents: Decreased to US$12,254mn in 2014E, down from US$14,130mn in 2013A.

Comparative Valuation

• Global Gaming Stocks:
  • Average EV/EBITDA: 11.0x (2014E), 13.6x (2015E).
  • Average P/E: 2.2% (2014E), 2.4% (2015E).
• Wynn Macau:
  • EV/EBITDA: 9.4x (2014E), 10.3x (2015E).
  • P/E: 20.0x (2014E), 23.5x (2015E).
  • Dividend Yield: 5.5% for both 2014E and 2015E.

Strategic Outlook

• Cotai Project: Expected to open by Chinese New Year 2016, with significant investment to date.
• Capital Expenditure: Increased to US$8,000mn in 2014E, with a focus on Wynn Palace.
• Investment Thesis: Maintained due to strong performance, stable margins, and the potential of the Cotai project.

Analyst Information

• Analysts: Billy Ng, Shaun C. Kelley, Angeline Ooi, Ronald Leung.
• Contact Details:
  • Billy Ng: +852 3508 7791, billy.ng@baml.com
  • Shaun C. Kelley: +1 646 855 1005, shaun.kelley@baml.com
  • Angeline Ooi: +852 3508 7668, linghui.ooi@baml.com
  • Ronald Leung: +852 3508 3728, ronald.leung@baml.com

Disclosure

• Conflict of Interest: BofA Merrill Lynch may have a conflict of interest due to its business relationships with companies covered in its reports.
• Disclosures: Refer to pages 7-11 for full details on analyst certification, price objective basis, and risk factors.