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Wynn Resorts Ltd WYNN

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Morningstar’s Analysis

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Elevated Country Risk Premium Stands to Lower Our Wynn and Las Vegas Sands Fair Value Estimates

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

We plan to adjust our cost of equity higher for narrow-moat Wynn (Macao was 76% of 2019 EBITDA) and Las Vegas Sands (59%), to account for an increased risk premium tied to increasing Chinese government oversight in the Macao gaming industry. As a result, we expect to lower our Wynn and Las Vegas Sands $114 and $59 fair value estimates, respectively, by a high-single-digit percentage. While that would still leave shares of both operators in undervalued territory, investors should expect near-term volatility given the broader uncertainty surrounding the impact of China's social policies in the gaming and other sectors. We don’t plan to materially adjust MGM’s $39 fair value estimate, given just 22% of its prepandemic EBITDA came from Macao.

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Company Profile

Business Description

Wynn Resorts operates luxury casinos and resorts. The company was founded in 2002 by Steve Wynn, the former CEO. The company operates four megaresorts: Wynn Macau and Encore in Macao and Wynn Las Vegas and Encore in Las Vegas. Cotai Palace opened in August 2016 in Macao, Encore Boston Harbor in Massachusetts opened June 2019, and various Vegas projects are currently under development. Additionally, we expect the company to begin construction on a new building next to its existing Macau Palace resort in 2022, which we forecast to open in 2025. The company also operates Wynn Interactive, a digital sports betting and iGaming platform. The company received 76% and 24% of its 2019 prepandemic EBITDA from Macao and Las Vegas, respectively.

3131 Las Vegas Boulevard South
Las Vegas, NV, 89109
T +1 702 770-7555
Sector Consumer Cyclical
Industry Resorts & Casinos
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 27,500