20171027-招商证券_香港_-镇海炼油化工股份-01128.HK-3Q17_in_line__exceptional_Cotai__solid_Peninsula_7页_650kb

Wynn Macau (1128 HK) 3Q17 Summary

Core Content

Wynn Macau reported strong results for 3Q17, with property EBITDA reaching US$321 million, a 82% YoY increase and 8% QoQ growth. The company's performance was broadly in line with estimates, with the target price (TP) remaining unchanged at HK$22.20. The report highlights that Wynn Palace, a key property, showed significant growth, especially in the mass market, which could lead to potential earnings upside in FY18E.

Main Points

• Performance Overview:

  • 3Q17 net revenue increased by 69% YoY and 5% QoQ to US$1,153 million.
  • VIP GGR rose by 18% QoQ, while mass GGR increased by 15% and 21% for tables and slots, respectively.
  • Wynn Palace's performance was offset by a decline in Peninsula's VIP business due to normalized high rollers' activity.
  • Combined, both VIP and mass GGR grew by 5% QoQ.
  • Overall, Peninsula and Palace contributed 52% and 48% to the company's net revenue, respectively.

• Financial Highlights:

  • 3Q17 EBITDA rose 83% YoY and 9% QoQ to US$278 million, with a 24% EBITDA margin.
  • The company's 12-month target price of HK$22.20 is based on the average of 23x FY18E P/E and 17x EV/EBITDA, which are in line with its five-year historical averages.
  • The TP implies 34x/26x P/E for FY17E and FY18E, and 18x/16x EV/EBITDA for FY17E and FY18E.

• Risks and Opportunities:

  • Potential triggers for another rally include continued sequential outperformance by Wynn Palace in mass market share and updates on the Wynn Cotai expansion plan.
  • Downside risks include underperformance in VIP due to tighter junket liquidity policies and slower-than-expected growth in premium mass business.

Key Financial Data

Investment Rating

• Overall Rating: BUY
• Target Price: HK$22.20 (+12% potential upside from previous price of HK$19.90)
• Sector Rating: OVERWEIGHT
• Peer Comparison:
  • Galaxy (27 HK): BUY, Target Price HK$56.10
  • Sands China (1928 HK): BUY, Target Price HK$42.70
  • MGM China (2282 HK): NEUTRAL
  • Melco Resorts (MLCO US): BUY, Target Price US$29.20
  • Melco Group (200 HK): BUY, Target Price HK$24.30

Key Data and Metrics

• Market Cap: US$13,342 million
• 52-Week Range (HK$): 11.02 / 21.75
• Average Daily Volume (mn shares): 10.2
• BVPS (HK$): 0.4
• Shareholding Structure:
  • WynnResorts: 72% (3,750 million shares)
  • Free Float: 28%
  • Outstanding Shares: 5,196 million

Financial Highlights

• Wynn Macau:

  • Net Revenue: US$19,250 million (FY17E)
  • EBITDA: US$5,958 million (FY17E)
  • EBITDA Margin: 31%
  • Net Profit: HK$3,359 million (FY17E)
  • EPS: HK$0.65 (FY17E)
  • DPS: HK$0.60 (FY17E)

• Wynn Palace:

  • Net Revenue: US$15,359 million (FY17E)
  • EBITDA: US$3,614 million (FY17E)
  • EBITDA Margin: 24%
  • Net Profit: HK$6,768 million (FY17E)
  • EPS: HK$0.65 (FY17E)
  • DPS: HK$0.60 (FY17E)

Valuation and Performance

• P/E (1-year forward): 30.7x (FY17E), 23.5x (FY18E), 20.5x (FY19E)
• EV/EBITDA (1-year forward): 16.3x (FY17E), 14.3x (FY18E), 13.3x (FY19E)
• Dividend Yield: 3.0% (FY17E), 3.0% (FY18E), 3.0% (FY19E)
• ROE: 140.4% (FY17E), 119.5% (FY18E), 89.9% (FY19E)

Summary of Key Financial Statements

• Income Statement:

  • Total Net Revenue: HK$34,608 million (FY17E)
  • Gaming Tax: HK$15,791 million (FY17E)
  • Labour Expenses: HK$4,444 million (FY17E)
  • Adjusted EBITDA: HK$7,992 million (FY17E)
  • Net Profit: HK$3,359 million (FY17E)
  • EPS: HK$0.65 (FY17E)

• Cash Flow Statement:

  • CF from OA: HK$7,898 million (FY17E)
  • CF from IA: HK$-884 million (FY17E)
  • CF from FA: HK$-6,370 million (FY17E)
  • Net Cash Flow: HK$644 million (FY17E)

• Financial Ratios:

  • EBITDA Margin: 23.1% (FY17E)
  • OP Margin: 14.2% (FY17E)
  • NP Margin: 9.7% (FY17E)
  • ROE: 140.4% (FY17E)
  • ROIC: 14.1% (FY17E)
  • Debt/Equity: 1273.4% (FY17E)
  • Net Debt/Equity: 1138.1% (FY17E)
  • Current Ratio: 0.6x (FY17E)
  • Quick Ratio: 0.5x (FY17E)
  • Asset Turnover: 0.8x (FY17E)

Conclusion

Wynn Macau's performance in 3Q17 was strong, particularly driven by the growth in Wynn Palace's mass market segment. Despite the strong results, the report suggests that the company is unlikely to see a significant re-rating or earnings upgrade. The continued performance of Wynn Palace and any updates on the Cotai expansion plan are potential catalysts for further growth. The BUY rating is maintained with a TP of HK$22.20, reflecting confidence in the company's ability to generate returns.