Crazy day for Wynn Resorts

Filed Under Macau, Macao, Cotai, Wynn

What a crazy and contradictory day for Wynn Resorts yesterday.

First, the day started off with rumors that Wynn Resorts was planning on raising anywhere between $500 million to $3 billion in a secondary stock offering on the Hong Kong Stock Exchange to help finance its Wynn Cotai Development. The reports were pretty detailed, even naming the investment banks the company had lined up to help.

When I read this, I thought a few things:

SJM’s IPO was reportedly below expectations, so is the demand even there?
With the stock trading more than 50% off its high, why in the world would you sell it. Companies typically dont want to sell shares if they think they are undervalued.
LVS is reportedly trying to raise $7 billion in the debt markets, so why wouldn’t Wynn try to raise debt rather than equity since debt is a less dllutive source of financing than equity.

Later on in the day, Las Vegas put out its May gaming results, which were apparently a lot worse than people had expected, as was seen by the huge sell off in all the Las Vegas companies.

And finally, after the market closed on the New York Stock Exchange, Wynn released preliminary results for its second quarter. Las Vegas looked pretty weak but Macao looked really strong (see below), and Wynn traded up a lot in after hours trading. Interestingly though is that Wynn also announced that they were authorized to buy back more shares, which is the exact opposite of selling shares in the earlier rumored secondary offering.

So Im still scratching my head trying to figure out what exactly is going on with the Macao financing, but overall, the good news is that the Macao results were strong, especially after some of the negative articles on Macao we’ve probably all read over the past week or two.

From Wynn Results preliminary second quarter press release

On a GAAP basis, operating income for Wynn Macau for the second quarter of 2008 is expected to be in the range of $100 million to $106 million, compared to $53.2 million in the 2007 period. Adjusted property EBITDA is expected to be in the range of $152 million to $158 million in the second quarter of 2008, compared to $92.7 million for the second quarter of 2007.

Table games turnover in the VIP segment increased 74.9% to $16.3 billion for the period, compared to $9.3 billion for the second quarter of 2007. VIP table games win as a percentage of turnover (calculated before discounts and commissions) was 2.96%, within the expected range of 2.7% to 3.0% and lower than the 3.3% in the comparable period of 2007.

Table games drop in the mass market category was approximately $626.9 million during the period, a 24.7% increase from $502.7 million in the second quarter of 2007. Mass market table games win percentage (calculated before discounts) of 18.9% was within the property’s range of 18% to 20% and was higher than the 18.4% in the second quarter of 2007.

Note: Cotai Strip is a trademark of Las Vegas Sands Corp.