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Wynn Resorts faces Goldman Sachs downgrade over Macau operations

US-based casino operator Wynn Resorts has been downgraded by Goldman Sachs. The investment banking group lowered its rating of Wynn from "buy" to "hold," and removed stock from its Conviction Buy List, with a 12-month target price of US$95 (vs $96 prior). 

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Goldman cited slow recovery to pre-pandemic business levels at Wynn Macau Ltd. as a major factor in its decision. This is due to Wynn’s Macau casino operation having a significant impact on the brand as a whole. The Chinese territory is the operator’s largest market and, in a normal operating environment, accounts for two-thirds or more of the firm’s revenue in any given quarter. 

August gains in Wynn Resorts shares also contributed to the banking group’s downgrade, with stock in Wynn Resorts up 14% toward the end of the month, from $80.28 on 20 August to $91.55 on 28 August, but down by 5.75% to $82.68 on 8 September. 

Moreover, Wynn Macau Ltd. confirmed a nearly $351.6m net loss in the second quarter, compared to a $168.6m profit in the equivalent quarter a year earlier. The operator added that its casino revenues for the three months to 30 June were negative by almost $15m, impacted by negative VIP hold. 

Goldman added that its concern over the state of Macau’s VIP market is relevant to Wynn since the operator is one of the concessionaires in the special administrative region most dependent on a higher-end clientele 

However, data points indicate that the September contraction in Macau’s gross gaming revenue should be less severe than in the previous five months. Additionally, the fair start to this month for Macau-based concessionaires is being propelled by the premium mass and VIP segments. 

For Macau operators, including Wynn, the short-term outlook boils down to waiting for the impact of individual visit scheme (IVS) visa reissuance to take hold. 

Guangdong, the mainland province closest to the gaming hub, is just two weeks into granting IVS permits again, and it’s taking a week to 10 days to get those passes into the hands of tourists. If there are no flare-ups of COVID-19, the rest of China will resume issuing IVS visas on 23 September, meaning it will be October before Wynn and its counterparts get a lift from that policy. 

 


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