Wynn UAE Casino to Benefit from Demographics, Taxes, Says JPMorgan

Posted on: October 10, 2024, 04:05h. 

Last updated on: October 11, 2024, 09:47h.

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

Wynn Resorts’ (NASDAQ: WYNN) integrated resort in the United Arab Emirates (UAE) is poised to benefit from attractive demographics and a favorable tax regime, according to JPMorgan analysts.

Al-Marjan Island
Al-Marjan Island in the UAE, site of Wynn’s casino resort. JPMorgan believes the venue will be a long-term success. (Image: Arabian Business)

In a new report to clients, analysts led by Joseph Greff noted that Wynn Al Marjan Island in Ras Al Khaimah (RAK) could draw from a lucrative client pool. At an investor event in Las Vegas earlier this week, Wynn noted the casino hotel is a 50-minute drive from Dubai International Airport, putting it within an eight-hour flight for 96% of the world’s population. Greff and his team narrowed that pool.

Core target markets represent approximately 25 percent of the world’s population, 20 percent of global GDP, and nearly 20% of the world’s millionaires,” wrote the JPMorgan analysts.

The Wynn venue, which will be the first regulated casino hotel in the Arab world, is under construction and expected to open in early 2027. With the UAE’s vast oil wealth and its rising number of ultra-wealthy citizens, coupled with Dubai’s status as a playground for the elite, demographics are relevant to Wynn Al Marjan Island and explain why some analysts are comparing the UAE’s still nascent casino market to Singapore’s.

UAE Regulatory Setup Favorable for Wynn Casino

At the investor event, Wynn said the budget for the UAE venture has expanded to $5.1 billion and its expected capital contribution will be $1.1 billion. Looking further out, the operator expects the UAE casino hotel to generate adjusted property earnings before interest, taxes, depreciation, and amortization (EBITDA) of $390 million to $570 million on sales of $1.38 billion to $1.88 billion.

A free cash-flow forecast of $170 million to $350 million and an expected return on invested capital of 9.8% to 15.7% are inline with analyst estimates. Greff said those forecasts aren’t particularly aggressive, and the UAE’s gaming regulatory environment appears hospitable.

“The regulatory framework compares favorably with some of the largest IR markets in the world, sporting a 10 percent to 12 percent tax rate on gross gaming revenue (GGR),” added the analyst.

That compares with the 40% rate in Macau. Speaking of Macau, where Wynn’s Macau arm runs two casino hotels, there’s a 10-year licensing period in the Chinese territory, but Wynn Al Marjan Island has been granted a 15-year permit.

UAE Could Be ‘License-Constrained’

Wynn rival MGM Resorts International (NYSE: MGM) has declared an intent to bid for a casino license at what’s currently a nongaming hotel complex in the UAE, but Wynn Al Marjan is expected to have a lengthy head start on other gaming venues in the region, and regulators there are likely to be pragmatic in issuing new permits.

We think this market [UAE], which will likely be license-constrained and focused on the high-propensity-to-spend luxury consumer in the region, has the potential to have similar characteristics as the attractive and high return-on-investment Singapore IR market,” according to Greff.

The analyst added that estimates of $3 billion to $5 billion for UAE’s total addressable gaming market could prove conservative over the long term, and the Wynn property  will hold a monopoly there “for at least a couple of years.”