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Wynn misses estimates as market share drops

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image Wynn Macau lost gaming market share during 2011 but analyst expect the operator to lose even more before it is able to make a move into Cotai

Wynn Macau’s full-year profit missed analysts’ estimates as the casino company benefited less than its competitors from surging gaming revenue. And investors are worried the operator’s market share drop might continue.
Fourth-quarter net income gained 15 percent from a year earlier to USD 239.9 million (MOP 1.9 billion), Wynn Macau said in a statement to the Hong Kong stock exchange today.
Based on numbers derived from the statement, full-year profit was USD 759.8 million (MOP 6.1 billion), lower than the average estimate of USD 795.3 million from 16 analysts surveyed by Bloomberg.
“Today’s numbers are in line with my expectations but I’m worried about its future growth because there’s still no news on when its Cotai project will be approved,” Lantis Li, a Hong Kong-based analyst at Capital Securities told Bloomberg. “If they don’t have a new facility, they may lose out to rivals like Sands. They are under a big threat.”
Wynn plans to build a casino in Cotai to fend off rising competition in Macau. Meanwhile new resort Sands Cotai Central is on track to open in about eight weeks, Sands China said last week.
Wynn Macau shares fell as much 5.6 percent in Hong Kong trading right after the results were released. The stock has gained 2.3 percent this year, less than the 26.4 percent gain of Sands China.
Fourth-quarter sales rose to USD 995.5 million up by 9.1 percent from a year earlier, Wynn Macau said. But analysts stressed that the improvement resulted in part from better-than-usual luck in both the VIP and the mass market segments. The operator was “not running on all cylinders in Macau yet,” said Harry C. Curtis, an analyst with Nomura Securities.

Cotai moves

Wynn Macau’s earnings growth is far below the industry average of 33.4 percent in the same period, which means it lost some of its market share. In January the operator took the fifth spot among the six operators, with a share above 12 percent.
And Sterne, Agee and Leach analyst David Bain believes Wynn Macau’s market share will be about 10 percent this year. Bain said in a note to investors that the biggest negative was a decline in VIP business from the previous quarter.
Brean Murray, Carret & Co. analyst Ryan Worst said the results revealed “a more difficult environment in Macau”.
“The major challenge to Wynn Macau comes from new casinos (…) as tourists and VIP guests are more likely to go to newer facilities,” Edwin Fan, gaming and consumer analyst at BOC International told South China Morning Post.
And Wynn Macau chief executive officer Steve Wynn acknowledged in a conference call that the competition was getting fierce.
“But I have a smile on my face because we’ll be the last to go at Cotai. Maybe we’ll have some new moves to show,” he said. “We continue to work on the final project scope, timeline and budget,” Wynn added.
“The project will open in 2016 at the earliest,” Edwin Fan predicted.
Wynn Macau’s parent company Wynn Resorts is embroiled in a legal dispute with board member and former vice chairman Kazuo Okada over the use of funds, which include a donation to the University of Macau.
But Steve Wynn reiterated that the dispute is linked to Okada’s decision to pursue a casino project in the Philippines. “We have expressed our convictions that it was not an appropriate business opportunity for us for a couple of years now,” he said. “We are not going to go into business in the Philippines.”
US-based company Wynn Resorts reported a 67 percent increase in fourth-quarter profit.

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