Soochow Securities (Hong Kong) released a research report stating that it maintains a "buy" rating for Wynn Macau (01128), and lowers the company's net income forecast for 2024-2026 to HKD 30.19/32.4/34.14 billion; and adjusts the property EBITDAR forecast for 2024-2026 to HKD 9.67/10.19/10.74 billion, with a target price of HKD 9.5.
The main points of Soochow Securities (Hong Kong) are as follows:
The company achieved a gambling revenue of 0.88 billion US dollars in 2Q24, a recovery of 64.3% compared to the same period in 2019.
Among them, VIP/mid-floor (including slot machines) achieved a gambling revenue of USD 0.14/0.74 billion, respectively, recovering to 19.8%/112.0% of 2Q19, respectively, a decrease of 3.4pct/10.6pct quarter-on-quarter. During the same period, according to the Gaming Inspection and Coordination Bureau (DICJ), the gambling revenue of VIP/mid-floor (including slot machines) in the industry recovered to 38.5%/111.3% of 2Q19, respectively, with a quarter-on-quarter recovery of 0%/1.0pct. The company's mid-floor recovery rate declined while the industry's recovery rate remained stable and rising, resulting in a 1.5pct quarter-on-quarter decline in the market share of the company's mid-floor/overall gambling revenue, which fell to 13.9%/12.6% of 2Q24.
The performance did not meet expectations, and the profit margin decreased by 2.3pct MoM to 31.7%.
On the revenue side, the company achieved an operating profit of USD 0.89 billion in 2Q24 (about 2% lower than market expectations), a quarter-on-quarter decline of 11.3%, and a recovery to 75.3% of the same period in 2019. Among them, the net income of gambling/non-gambling was USD 0.73/0.16 billion, respectively, a quarter-on-quarter decline of 11.5%/10.6%, recovering to 71.9%/96.4% of 2Q19.
On the profit side, the company's adjusted property EBITDAR was USD 0.28 billion in 2Q24 (about 2% lower than market expectations), a quarter-on-quarter decline of 17.4%, and a recovery to 81.7% of the same period in 2019. The adjusted property EBITDAR profit margin quarter-on-quarter declined by 2.3pct to 31.7% of 2Q24, mainly affected by operating leverage. However, the company's adjusted property EBITDAR profit margin still increased by 2.5pct compared to 2Q19, mainly due to the company's daily operating expenses decreasing by 19% from USD 3.2 million in 2Q19 to USD 2.5 million in 2Q24.
In July 2024, the company's market share has returned to the expected level.
The management of the company stated that despite the slight decline in the company's market share in 2Q24, due to strong mid-field bets and a hotel occupancy rate of up to 99%, the market share of the company's gambling revenue has returned to the expected level in July 2024. Looking forward, management stated that they will reduce their focus on market share fluctuations between quarters, continue to improve their product and service levels, maintain caution in fierce market competition, and ensure that investment projects bring reasonable returns.