Wynn Resorts (WYNN) September 2024 Valuation Model and Risk Framework

This WYNN valuation model includes an asset/SOTP valuation, company comparable relative value matrix, financial forecasts, segment breakdown, and detailed operating model. Assumptions can easily be adjusted by the user.

Wynn is one of a handful of companies in Macau that could potentially benefit from higher China stimulus.

In the case of WYNN, LVS, MLCO and, to an extent, MGM, absolutely negative sentiment on Macau has caused these stocks to be sizable underperformers. WYNN was down ~17% YTD as of Sept 1, versus the SPX, which had returned ~16% YTD. Its share price was back to March 2006 levels in early September (this is not a typo).

We think WYNN, in the $70s/80s, represents a good risk-reward, with a value that we can argue reflects reasonably low to fair (and not excessive) value for its Las Vegas and Encore Boston Harbor asset values/cash flows, its developable LV land and Macau royalty streams, with hardly any value for its Macau property cash flows (which can be approximated, at the very least, via its 72% stake in HK 1128).

If we were to give full NPV per share value for Wynn Al Marjan, UAE (WYNN has a sizable equity interest in the property with a management contract; the property opens in 2027 and WYNN has invested $514m as of 6/30/24), this basically offsets any value currently ascribed to its majority stake in Wynn Macau.

We lay out the math in the model.

Investor Day Coming in October

WYNN is hosting an investor day in early October in Las Vegas to provide the buy-side and sell-side with a detailed, 3-hour presentation, where we’d expect the majority of this time is utilized for management to specifically discuss its opportunities in the UAE. We think it is important to recognize that heretofore management has been (mostly) quiet on this project, since there hasn’t been a lot of certainty as to when gaming regulations would be announced/codified and a formal license granted to Wynn Al Marjan. The fact that management is willing to host a 3-hour investor meeting could likely imply that regs and license issuance are imminent (in any event, we don’t look at this as a de-risking event, but rather one in which equity investors can start to ascribe the discounted equity value related to the project). It could also suggest that management and the Board are looking to be incrementally visible (aggressive) on ways to generate shareholder value.

Business Overview

Wynn Resorts operates a handful of luxury casino resorts, including the Wynn Las Vegas in Las Vegas, and the Wynn Macau and the Wynn Palace in Macau, China, the only place in China where gambling is legal. The company's properties integrate luxury hotel rooms, high-end retail, an array of dining and entertainment options, meeting and convention space, and gaming. Most revenue comes from its Macau operations at over 45% of sales. The company was founded in 2002.

Operations

Wynn Resorts gets over 55% of its revenue from its casino segment; around 15% from food and drink; and more than 15% from hotel rooms fees. The remainder comes from entertainment, retail, and other operations.

In Macau, China, its Wynn Palace features a luxury hotel tower with more than 1,700 guest rooms, about 470,000 square feet of casino space, some 37,000 square feet of meeting and convention space, and approximately 107,000 square feet of retail space.

Its smaller Chinese property, Wynn Macau, features two hotel towers with more than 1,000 rooms, along with casino and retail space, and meeting and convention rooms, with approximately 294,000 square feet of casino space with about 275 table games and roughly 565 slot machines, as well as private gaming salons, sky casinos, and a poker room. It offers nearly 15 food and beverage outlets, ~64,300 square feet of high-end, brand-name retail space, and ~31,000 square feet of meeting and convention space.

Wynn Las Vegas boasts two hotel towers with about 4,750 rooms, and space for casino gaming, meetings and conventions, and retail. The property features approximately 194,000 square feet of casino space with about 230 table games and more than 1,670 slot machines, as well as private gaming salons, a sky casino, a poker room, and a race and sports book.

Steve Wynn founded Wynn Resorts in after buying the Desert Inn hotel and casino in Las Vegas for $270 million from Starwood Hotels & Resorts as a birthday gift for his then wife in 2000. The deal followed his sale of Mirage Resorts to MGM Grand. Wynn reportedly received nearly $500 million from the Mirage sale.

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