Macau’s contributions boost
Wynn Resorts’ revenues, earnings

Mar 6, 2007 5:06 AM

As gaming giant Steve Wynn has been quoted as saying, investing in Macau is a "no-brainer."

But even spectacular results from the Wynn Macau gaming emporium couldn’t shield the popular shares of Wynn Resorts Ltd. (WYNN) from last week’s Wall Street correction.

WYNN shares that had been pushing the mid-$105 level fell back to $93.63 on Friday, following a week during which nearly all gaming stocks followed the downward path caused by massive selling on Wall Street. The downward trend continued in Monday trading with WYNN closing at $89.37.

In reporting its fourth quarter results, Wynn Resorts officials noted that even though they experienced a loss during the period, primarily because of a special distribution to convertible debenture holders, the adjusted net income was $57.1 million or $0.53 per share compared to an adjusted net income of $6.5 million of $0.08 per share in fourth quarter of fiscal 2005.

Net revenue during the period was $564.6 million, up from the $269.4 million reported in the comparable quarter of a year earlier due to the inclusion of a full quarter of business at its Macau facility. With just 220 tables, 80 slot machines and 600 hotel rooms, the Macau casino generated $248.7 million in net revenue.

Last month, the company beefed up its gaming positions by adding 36 table games and nearly 400 slot machines. In the third quarter of 2007, it expects to open an expansion that will include 123,000 square feet of gaming space that will nearly double the total number of gaming positions.

For the fiscal year, operating revenues rose to $1.4 billion or nearly twice last year’s revenues of $721.9 million. Net income, including the $900 million received for a subconcession gaming license in Macau, was $628 million compared to a loss of $90 million fiscal 2005.

Pinnacle Entertainment

Trying to compete with the sensational numbers it achieved in the prior year caused trouble for Pinnacle Entertainment Inc. (PNK), during the fourth fiscal quarter. But the company is credited by most analysts with having the largest number of projects in the pipeline among the country’s major gaming companies.

For the fourth quarter, the company said its revenues were $212.7 million and adjusted EBITDA of $34.5 million compared to last year’s $227 million and $46 million, respectively.

But last year’s revenues were achieved during a period when most of Pinnacle Entertainment’s competitors were temporarily closed due to Hurricane Katrina.

Boomtown New Orleans, without the competition from land-based Harrah’s Casino in New Orleans, was down 38%. And even Belterra Casino Resort in Indiana, that spent a great deal more in marketing to fight off competition, saw a drop of 27%.

Continuing to show it promise, however, was the company showplace L’Auberge du Lac in Lake Charles where the property showed a jump of 12%.

As for developments, Pinnacle Entertainment has two projects slated for St. Louis, Mo., a new facility in Lake Charles and a casino earmarked for Atlantic City. Meanwhile, the company is fighting to locate a riverboat in Baton Rouge, La.

Dan Lee, chairman and CEO., said he believed there was a "pretty good shot" the company will receive permission to place its riverboat in East Baton Rouge.

"We remain focused on improving and expanding each of our five major U.S. resorts," he added.

HET and STN

As for the two gaming companies that have agreed to be taken over by outsiders or by insiders, investors pretty much ignored the report of their quarterly performances. In fact after the reports were made last week, neither company — Harrah’s Entertainment Inc. (HET) and Station Casinos Inc. (STN) — bothered to entertain questions from analysts.

Harrah’s Entertainment, the country’s largest casino company, reported income from operations of $229.7 million and income from continuing operations of $39.4 million. In the fourth quarter of fiscal 2005, the company reported a loss of $24.5 million.

During the reporting period, the company said same-store sales at properties that have been operating for more than 12 months rose 6.8%.

For the full year, income from operations was $1.6 billion, a 51% jump over last year’s $1.0 billion. Income was $523.9 million or $2.79 per share, easily topping last year’s $316.3 million and $2.10 per share.

In the past two weeks, the company has taken over the operation of the former Barbary Coast Hotel/Casino, now called Bill’s Gamblin’ Hall & Saloon, on the Las Vegas Strip, and the high-end British casino company London Clubs International.

On April 5, the company will hold a meeting of the stockholders to vote on the company’s planned announcement to be taken over by private equity companies Apollo Management and Texas Pacific Group for $90 per share.

As for Station Casinos, the company said fourth quarter diluted earnings per share dropped to $0.53 from the $0.69 reported in the fourth quarter of 2005.

Net revenues for the fourth quarter increased 26% to $358.8 million and its EBITDA was $141.5 million, a jump of 14% over last year’s fourth quarter.

The company said it experienced a loss of $2.5 million due to the cancellation of a residential project at Red Rock, a $2.3 million expense to develop new gaming opportunities, primarily related to Native American gaming, a $2 million pre-opening expense related to its master plan and another $2.5 million expense related to other projects.

"The fourth quarter revenue and EBITDA results came in as expected," said Lorenzo Fertitta, vice chairman and president. "Trends for the quarter in terms of same store revenues and the promotional environment were consistent with our guidance."