Wynn Resorts Limited

Wynn Resorts Limited

Basic Information:

Primary Exchange – NASDAQ

Ticker – WYNN

Primary Sector – Consumer Discretionary

Current Stock Price – $165.00 (12/14/17)

Target Stock Price – $161

Investment Recommendation – Buy

Investment Summary:

Steve Wynn began his career in investing in the Golden Nugget Casino, where he would become CEO and would begin the expansion of Golden Nugget Resort and Casinos in Las Vegas and Atlantic City. This would lead into the building of the Mirage Casino, which was one casino that helped spark a building boom on the Las Vegas Strip. The Golden Nugget Inc. would be changed to Mirage Resorts, Inc. in 1991. After years of expansion and growth of Mirage, Steve Wynn would form his own group and begin Wynn Resorts in 2002.

Wynn Resorts, Ltd, owns and operates Wynn Las Vegas as well as Encore in Nevada. Wynn also has resorts in Macau, China, the Wynn Macau and Wynn Palace. The United States destinations have thousands of rooms for guest to book and stay in, both suites and villas, as well as hundreds of thousands of square feet of Casino space. While in these resorts there are many restaurants and bars that people can go to, as well as other amenities like a beach club and nightclubs.

Similar to the holdings in the United States, these resorts feature similar amenities and an increased amount of casino space where people can enjoy their favorite games as they try to strike big. With new locations such as the Wynn Boston Harbor and the Wynn Palace in Macau, Wynn is becoming a much larger player in the Resort & Casino Industry worldwide.

Business Description

Wynn Resorts, Ltd, owns and operates destination casino resorts that integrate hotel accommodations and a wide range of amenities, like fine dining outlets, premium retail offerings, distinctive entertainment theaters and large meeting complexes. Wynn Resorts divides their holdings into segments, between Macau Operations and Las Vegas Operations.

Macau Operations:

Wynn Macau operates two luxury hotel towers that have a total of over 1,000 guest rooms and suites, with approximately 284,000 square feet of casino space, casual and fine dining in eight restaurants, as well as over 30,000 square feet of meeting space. The Macau location also features 105,000 square feet of retail space, public attractions that include a performance lake, floral art displays, and recreation and leisure facilities.

Wynn also operates the Wynn Palace, which is another location in Macau that has over 1,500 rooms that include suites and villas, 420,000 square feet of casino space, 10 food and beverage outlets, 40,000 square feet of convention space. The location also features 105,000 square feet of retail space, public attractions, and facilities like the Wynn Macau.

Las Vegas Operations:

Wynn Las Vegas owns and operates two luxury hotel towers that have a total 4,748 guest rooms, suites, and villas, with 189,000 square feet of casino space. The venues also have 33 food and beverage outlets, an 18-hole golf course, also has 290,000 of convention space and 99,000 square feet of retail space on the Las Vegas Strip. In agreement with Crown Acquisitions Inc., Wynn and Crown decided to own and operate an additional 88,000 square feet of existing retail space, with Wynn owning the controlling share of the property, and should be open in the beginning of 2018.

Unfortunately, Wynn does not distinguish its revenues and expenses between its segments, which would be helpful in distinguishing which markets are the more lucrative. Shown below is all of the sources of revenue that Wynn Resorts has and the resulting dollar values in the thousands.

As the data shows, the Casino revenues can vary highly just based off of the luck of the attendees. In a late July article on Bloomberg, Steve Wynn describes how the “House” lost millions of dollars from high-roller gamblers, which was considered the “most unique statistical anomaly” (Palmeri & Wei, 2017) that Steve Wynn has experienced in 50 years of working in the Casino Industry. With this knowledge, the “House” always wins, but it can be susceptible to large variances in revenue due to these high rollers getting lucky. The revenues coming from Rooms, Food and Beverage, and Entertainment, etc., aim to stabilize the losses that can be encountered from gambling. Because the casino offers free accommodations, food and beverage, and other services are included in gross revenues. While the casino industry may seem to be a lucrative one, there are many expenses necessary in creating this luxurious experience that Wynn aims to provide. Shown below is the operating costs and expenses of Wynn Resorts Ltd. of the past three years.

(Cut from Above: Dates 2016, 2015, 2014 from left to right)

With the costs that are incurred by Wynn Resorts, one can see that there are high costs that the casino has to take on when trying to provide the ultimate gaming and resort experience. These costs include Casino, rooms, food and beverage, entertainment and etc., general and administrative, provision for doubtful accounts, pre-opening costs, depreciation and amortization, as well as property charges and other. Wynn uses a straight-line of depreciation when calculating their expenses, with varying useful lives depending on the asset. Shown below is the useful lives of the various types of assets that Wynn owns.

Accounting for a casino is difficult to calculate, with very liquid assets, and people collecting various amounts of money in forms of souvenirs, as well as being a 24/7 business. With this thinking in mind, these financial statements are an estimate and can be different based off this knowledge.

Management & Governance

Stephen A. Wynn has served as Chairman and CEO of Wynn Resorts, Ltd, since 2002. He is also sits in similar positions in subsidiaries such as Wynn Macau since 2001. Prior to starting Wynn Resorts, Ltd., Stephen Wynn has developed, opened, and operated the Mirage, Treasure Island and Bellagio. Under Wynn is a team of Directors that help serve the company, with these directors being CEOs, Presidents,