Wynn Resorts (NASDAQ:WYNN) and competitors are facing a variety of regulatory and coronavirus-related headwinds in Macau, but CEO Matt Maddox remains optimistic on the outlook for the world’s largest casino center.
In a Thursday interview with “Mad Money” host Jim Cramer on CNBC, Maddox spoke bullishly on Macau, saying the Chinese special administrative region (SAR) could eventually experience a rebound on par with Las Vegas.
I have a very, very bullish view of the future of Macau and what we’re going to see going forward,” said Maddox in the interview.
Last week, shares of all six Macau concessionaires plunged, resulting in more than $20 billion in evaporated market value in a single day, after authorities there roiled markets by laying out plans investors interpret as efforts to rein in the gaming industry.
Wynn’s Wynn Macau arm controls two integrated resorts there — Wynn Macau and Wynn Palace — and the SAR typically drives about two-thirds of the parent company’s revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) in a standard operating environment.
As such shares of Wynn are proving vulnerable to the regulatory headwinds with the stock off 15.7 percent month-to-date.
Maddox: Details Matter
The Wynn chief executive told Cramer a lot of folks probably haven’t read or are misunderstanding the consultation report recently issued by Macau officials, noting policymakers are prioritizing the health and the stability of Macau.
Maddox says the Macau government is going to take into consideration “the overall employment picture of Macau coupled with return on investment for shareholders” when considering license renewal. Wynn Macau employs 15,000 people in the SAR. All six concessionaires face renewal of their permits in June 2022 and there’s speculation that as part of new regulatory efforts, the government could slash licensing periods to 10 from 20 years.
Maddox also took aim at Kynikos Associates founder Jim Chanos, saying he’s probably among those that haven’t read the consultation report. Earlier this week, Chanos revealed his firm is short Wynn stock, noting it should be trading in the $40s, not the $80s.
Some other investors remain skittish about the near-term prospects for Macau. For example, Capital Group, a major fund issuer, revealed in a new filing with the Hong Kong Stock Exchange, that it pared its stake in Wynn Macau shares to 6.87 percent from 7.2 percent.
Wynn Has US Buffer
Unlike rival Las Vegas Sands (NYSE:LVS), which for now is out of the US, Wynn has its eponymous integrated resort and Encore on the Las Vegas Strip as well as Encore Boston Harbor, levering the operator to recovery in the US.
“I’ve been at Wynn for 20 years and just like I said on the second-quarter earnings call, we’ve never experienced the type of business that we’re seeing right now in Las Vegas and in Boston,” said Maddox. “It’s extraordinary and we’re seeing that without international travel.”
He added that earlier this week when the US announced vaccinated European travelers could enter the US, Wynn’s Las Vegas reservations from UK tourists spiked from zero to “hundreds.” That could be one sign Wynn stock could pay off for eager retail investors that are flooding into the name.