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Susquehanna cuts Wynn Resorts' price target

Dec 5, 2008 6:30 PM

by Kevin Stott |

On Thursday, Robert LaFleur, an analyst for Susquehanna Financial Group, cut his target share price for casino operator Wynn Resorts (WYNN) from $56 to $47 but maintained a "positive" rating for the stock.

LaFleur said, "We are updating our estimates to reflect the company’s recent stock offering in mid-November. Our property operating assumptions remain unchanged. Wynn offered 9.2 million shares of common stock at an offering price of $43.50 in conjunction with Wynn’s inclusion in the S&P 500.

"The company is expected to use the roughly $400 million in proceeds to de-lever. On its 3Q 2008 conference call, Wynn highlighted its strong capital position and after Wynn opens both Encore in Las Vegas and Macau (China) it should generate strong free cash flow and de-lever even more rapidly. We estimate the company’s leverage ratio will go from its current level of 4x to just over 2x by the end of 2011. We have slightly revised our 4Q 2008 estimate from $0.53 from $0.52, and our FY 2008 EPS estimate is unchanged at $2.98. Our new FY 2008 estimate goes to $2.16 from $2.04 our lower net interest expense."

Wynn, led by billionaire Steve Wynn, increased the size of its public stock offering to 8 million shares and priced it at $43.50 in November. The company said that it planned to use the proceeds for general corporate purposes, including the repayment of debt.

Shares of Wynn Resorts fell $2.12 (-5.3%) to $37.90 at the close of Thursday trading in volume of 2.2 million on Nasdaq. Shares of Wynn are now down 68.95 percent year-to-date. The 52-week high was $124.77 (Feb. 12) while the 52-week low came five weeks ago (Oct. 28) at $28.06.

Casino operators in Sin City have been hurt by the city’s high number of foreclosures, tightened spending by consumers and diminishing lines of credit. In Macau, stricter visa restrictions and commission caps. Macau has looked to limit commission rates paid to junket operators who bring VIP customers into casinos while also placing a limit on how frequently the mainland Chinese can actually visit Macau.

Wynn’s $2.3 billion Encore is scheduled to open later this month while a similar version in Macau is targeted to open its doors to the public in mid-2010.