Wynn UAE Casino Could Drive $350M in Cash Flow, Says Analyst

Posted on: October 8, 2024, 03:03h. 

Last updated on: October 9, 2024, 10:21h.

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

Wynn Resorts’ (NASDAQ: WYNN) recently approved casino resort in the United Arab Emirates (UAE) could be a significant contributor to the operator’s long-term free cash flow.

Wynn UAE
Construction at Wynn Al Marjan Island. An analyst says the property could be a significant contributor to the operator’s free cash flow. (Image: Wynn Resorts)

In a new report to clients, CBRE Equity Research analyst John DeCree estimates that at maturity, Wynn Al Marjan Island could drive $350 million or more in yearly free cash flow (FCF) to the Las Vegas-based parent company. Construction on the venue scheduled to open in early 2027 commenced earlier this year.

“Based on the company’s 40% ownership interest and management contract, we estimate Wynn Al Marjan Island could contribute over US$350 million of FCF to Wynn when fully stabilized,” observed DeCree.

Previously, some analysts estimated Wynn Al Marjan Island could generate up to $1.4 billion in annual gross gaming revenue (GGR), positioning the broader UAE casino market — assuming more gaming venues are approved — to reach $3 billion to $5 billion in yearly GGR.

Wynn Still Not Getting UAE Credit

Last Friday, the General Commercial Gaming Regulatory Authority (GCGRA), the UAE’s first gaming regulatory agency, approved a commercial gaming facility operator permit for Wynn Al Marjan Island. That marks the first such approval in the history of any Middle East nation.

Still, analysts, including DeCree, argue that shares of Wynn aren’t getting credit for the UAE venture even though the property could be an earnings juggernaut when it reaches maturity. Additionally, Wynn could have a temporary monopoly in the region because no other casino licenses have been approved as of yet, indicating the operator has a leg up on rivals that could enter the Emirates.

“So far, investors have given no credit to Wynn Resorts for Wynn Al Marjan Island, which we estimate could generate approximately $920 million of earnings before interest, taxes, depreciation, and amortization (EBITDA),” wrote DeCree.

The analyst said approval of the UAE permit could rejuvenate interest in Wynn shares. Wynn owns 40% of the $4 billion UAE project and is expected to be able to self-finance its approximately $900 million commitment.

UAE Taking Pragmatic Approach to Gaming

Perhaps one of the reasons investors aren’t fully appreciating the Wynn Al Marjan Island integrated resort in Ras Al Khaimah (RAK) is because the UAE hasn’t signaled an intent to open the floodgates to casino gaming.

We don’t anticipate any broad publication of formal legislation decriminalizing gaming, at least not yet, partly due to the cultural sensitivities to gaming in the region,” added DeCree. “The UAE is very thoughtful and deliberate in its approach and we remain comfortable enough with the legislative and regulatory landscape.”

DeCree rates the stock “buy.” Wynn is holding an event at its flagship integrated resort on the Las Vegas Strip on Tuesday to discuss the UAE project with analysts and institutional investors.