US casino operator Wynn resorts should see its EBITDAR leverage improve from near 7x in 2023 to the low-5x range by 2025 thanks primarily to the ongoing recovery in Macau, according to ratings agency Fitch.
The forecast formed part of a Wednesday note in which Fitch issued a first-time “BB-” Issuer Default Rating to Wynn Resorts Ltd and many of its subsidiaries, including Wynn Macau Ltd, with a stable outlook. This rating, it added, reflects the “high-quality portfolio of [Wynn’s] gaming assets, the expected improvement in Macau’s gaming market in terms of visitation and gaming activity that is expected to drive further improvement in credit metrics, strong results in Las Vegas, and robust liquidity that should fund near-term capital projects and could lead to further debt reduction.”
However, Fitch pointed to Macau as the main driver of positive sentiment in the short-term, adding that it expects revenue growth in the mid-teens in 2024 and EBITDAR margins to improve by 100 to 150bp.
“The strong rebound in Macau gaming revenues following the removal of the travel restrictions in early-2023 is expected to be an important driver of Wynn’s overall credit improvement,” the agency said. “Fitch estimates that mass market baccarat has almost fully recovered to 2019 levels, particularly in the premium mass, which is Wynn’s target market. Mass market baccarat was 91% of full year 2019 levels, although 4Q23 levels exceeded the 4Q19.
“Despite the rapid growth in gaming revenues, visitation and airline capacity remain below 2019 levels, and the rebound in those metrics should provide another source of further revenue growth over the near term.
“Results at Wynn Palace has responded strongly, with mass market revenues and property EBITDAR margins for 3Q23 already above 2019 levels. Wynn Macau has rebounded a bit slower as the property continues to focus away from the VIP market while increasingly catering more to the premium mass market.”
Fitch said it expects Wynn’s credit will continue to improve despite the existence of several material capital projects in Macau, Las Vegas, Boston and the United Arab Emirates.
