Wynn Macau Gets $1.5B Loan, But Two Analysts Downgrade Wynn Stock

Posted on: September 17, 2021, 12:12h. 

Last updated on: September 17, 2021, 01:22h.

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

Amid a week of regulatory upheaval that battered its shares, Wynn Macau procured a $1.5 billion credit revolver. But that didn’t prevent two analysts from downgrading the US parent, Wynn Resorts (NASDAQ:WYNN).

wynn stock
Amid Macau regulatory concerns, it’s been a bad week for Wynn stock. Two analysts downgraded the name today. (Image: Las Vegas Review-Journal)

In a Friday filing to the Hong Kong Stock Exchange, Wynn Macau announced it landed the credit facility from a consortium of banks, led by the Macau branch of Bank of China. The capital will be used to “refinance certain indebtedness of the group,” and “to fund ongoing working capital needs and for general corporate purposes,” according to the regulatory document.

News of the loan arrives just two days after the six Macau concessionaires bled more than $20 billion in combined market capitalization. That’s amid fears that the local government is seeking to take a more active role in regulating the gaming industry.

On Wednesday alone, shares of Wynn Macau tumbled almost 29 percent, as JPMorgan downgraded all six Macau concessionaires to “neutral” or “sell” ratings.

Concerns are escalating about Macau wanting to reconfigure its gaming laws ahead of the June 2022 license renewal process. The special administrative region’s (SAR) government could burden integrated resort operators with regulations.  Those may include larger equity stakes for the government, short license periods, and restrictions on dividend payments.

No Good Awful Week for Wynn Stock

Wynn Macau and Wynn Palace — the operator’s two venues in the SAR — account for roughly two-thirds of the parent company’s quarterly revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) in normal operating environments. It’s not surprising Wynn Resorts stock is under significant duress this week.

Late Friday, shares of the Las Vegas-based gaming company are flirting with a weekly loss of 19 percent, as analysts and investors ponder what’s next for the operator in its most important market. In addition to lowering its rating on Wynn Macau, JPMorgan downgraded Wynn Resorts earlier this week, as well.

Today, two more analysts hopped aboard the bearish Wynn train, with Jefferies’ David Katz downgrading the stock to “hold” from “buy” with an $83 price target.

“The recent developments in Macau around concession renewals implied tighter restrictions on the gaming industry going forward,” he said. “We believe WYNN’s VIP business, which had been the primary earnings contributor pre-COVID, could be materially impacted. Combined with the ongoing COVID overhang, we are taking a more conservative approach, lowering our estimates.”

Argus also lowered its rating on Wynn stock to “hold” from “buy.”

Rough Near-Term Outlook for Wynn

Macau authorities are holding a consultation period that will stretch into late October. As Argus analyst John Staszak notes, that could present potential headline risk for gaming companies with Macau footprints.

“Our less optimistic view reflects heightened scrutiny by the Macau government as it begins a 45-day consultation period in which it overhauls regulations, reviews the number of casino licenses it will grant and scrutinizes supervisory requirements,” he said in a note to clients.

Wynn stock is off 25.22 percent year-to-date and resides at its lowest levels since November 2020.