After healthy December visitation growth and strong upcoming bookings, we're maintaining our fair value estimate for Wynn.
By Dan Wasiolek | 01-23-17 | 11:11 AM | Email Article

We maintain our constructive view on Macau’s intermediate growth potential after healthy December visitation growth of 6.8% and our checks that point to strong bookings for the upcoming Chinese New Year (Jan. 28 through Feb. 2), both of which are incorporated in our recently raised 2017 industry gaming revenue forecast of 6% (from low-single-digit growth prior). We plan to maintain narrow-moat  Wynn’s $123 fair value estimate, which forecasts a five-year revenue CAGR of 10% and 24% operating margins in 2020 versus 16% in 2015, leaving shares trading around a current 25% discount.

Dan Wasiolek is a senior equity analyst for Morningstar.

December visitation growth of 6.8% was the strongest year-over-year print for the industry since November 2014, and the roughly 10% two-year growth stack visitation for the month was well above levels of any month during 2016. Additionally, December overnight visitation growth of 16.5% represented 51% of total visitors, which we believe offers support of our stance that new casino openings would drive increased visitation.

Our checks into room availability for the upcoming Chinese’s New Year also point toward solid visitation. We found that Wynn’s Macau and Cotai properties (11% of total casino operator hotel supply) were fully booked, which was also the case with Sands new Parisian resort (12%) and MGM’s existing Macau property (2%). There were still some rooms available for Jan. 28-29 at Sand’s Venetian (12%) and Sands Central hotels (23%), but at what appear to be healthy room rates. To illustrate, a room at the Venetian for Jan. 28 and Jan. 29 was offered at around $373 and $554, respectively, which compares with its average daily rate in last year’s first quarter of $226. Although room rates in the weeks following New Years are being offered at around $150 a night, we see this channel check as a supportive data point to our constructive view for the region’s growth opportunity.

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