Wynn Macau Still Bleeding Cash, Forecasts Massive Q1 EBITDA Decline

Posted on: April 9, 2020, 08:46h. 

Last updated on: April 9, 2020, 11:12h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Macau continues losing money, although casinos in the world’s largest gaming center are open for business. The company expects the cash burn will continue as long as protocols implemented as a result of the coronavirus outbreak remain in place.

Wynn Macau Continues Cash Burn
Wynn Macau continues burning cash and expects to do so until COVID-19 measures are lifted. (Image: Wall Street Journal)

Like other operators on the peninsula, Wynn Macau is still dealing with the effects of a 15-day closure in February – one forced by the government to stem the spread of COVID-19 – and harsh travel controls that are still keeping many gamblers away. During the February shutdown, Wynn said it was losing approximately $2.5 million per day in Macau, not including $500,000 in daily interest expenses.

On March 20, 2020, our casinos’ operations were fully restored. However, certain health safeguards, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and health declarations remain in effect at the present time,” said Wynn Resorts (NASDAQ:WYNN) in a regulatory filing. “We are currently unable to determine when these measures will be lifted.”

Until lawmakers in Macau end requirements, such as limiting the number of players at gaming tables and forced distancing measures in slot banks, Wynn said it expects to continue incurring those losses and that it faces costs in excess of the amount earned by its integrated resorts.

Help Needed

In addition to needing the social distancing measures to be relaxed, Wynn and rival Macau operators need help in another department. Beijing is currently freezing issuance of the individual visit scheme (IVS) – the visa system used by most gamblers on mainland China to enter the Special Administrative Region (SAR).

Until the IVS restrictions are lifted, analysts believe Macau concessionaires will encounter difficulty in reaching the roughly $38 million in daily revenue needed to break even on earnings before interest, taxes, depreciation and amortization (EBITDA) basis this year. They also will not come anywhere near the $49.45 in daily turnover necessary to reach break even on a cash flow basis.

“Visitation to Macau has meaningfully decreased since the outbreak of COVID-19, driven by the outbreak’s strong deterrent effect on travel and social activities, the Chinese government’s suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau, quarantine measures, travel and entry restrictions, and conditions in Macau,” according to Wynn’s filing.

The company’s US properties – the Wynn and Encore in Las Vegas and Encore Boston Harbor – remain shuttered by COVID-19.

Gloomy Forecasts

Wynn Resorts recently update investors on what is a relatively sturdy liquidity position. But the regulatory filing contains some ominous first-quarter forecasts.

Citing the coronavirus pandemic, the company said it expects adjusted property EBITDA for the January through March period to slump to $58 million to $65 million from $484 million a year earlier. Wynn forecast operating revenue of $912 million to $969 million, down from $1.64 billion in the first three months of 2019.

Up almost 28 percent over the past week, Wynn stock has nearly doubled off the 52-week high hit just last month.