Craig Billings took the helm as chief executive officer of Wynn Resorts (NASDAQ:WYNN) at the start of February. He’s already looking to shake things up by evaluating non-gaming amenities in Macau and dialing back expenditures on the company’s online sportsbook operation.
In a normal operating environment, which hasn’t been seen in Macau since 2019, the special administrative region (SAR) drives about two-thirds of its earnings before interest, taxes, depreciation and amortization (EBITDA) and revenue. But things haven’t been normal there since the start of the coronavirus pandemic.
Still, Billings remains optimistic about the world’s largest casino center, telling Bloomberg News in a recent interview he’s “excited and fascinated by Macau,” where the operator controls Wynn Macau and Wynn Palace.
China has a zero-tolerance policy on COVID-19 — one that’s hindering Macau’s recovery by keeping would-be visitors at bay. However, Beijing is showing some signs of acknowledging zero-tolerance is likely an unreasonable mandate. It recently loosened some of the testing requirements for tourists from Hong Kong and the mainland looking to enter Macau.
Divided Case on Wynn Shares
Like other Macau operators, Wynn has experienced significant share price retrenchment since the start of the pandemic. The stock is down 36.48% over the past year. It would need to roughly double to return to the highs notched just before founder Steve Wynn departed the company in 2018 amid a flurry of sexual misconduct allegations.
Today, some analysts believe Wynn is a prime rebound candidate, noting the worst news out of Macau is likely baked into the stock, and that the shares are inexpensive. Conversely, some bearish traders believe the stock remains considerably overvalued, noting there are significant, persistent risks to relying on China, and that the shares could be halved from here.
For his part, Billings sees opportunity in the SAR by applying a template that’s been successful at the operator’s Las Vegas Strip venues and Encore Boston Harbor: bolstering non-gaming amenities that are attractive to younger demographics.
That would be to the delight of Macau officials, because policymakers are seeking economic diversification and weighing on gaming operators to lead that charge.
Looking further out, regional diversification could add to the case for a Wynn equity recovery. As noted above, Macau represents an outsized portion of its business. More diversity could be realized with plans for an integrated resort on Al-Marjan Island in the United Arab Emirates, and perhaps other US venues. But those are longer-ranging efforts.
Billings Mum on Sports Betting Unit Sale
In January, rumors surfaced that Wynn was shopping its Wynn Interactive unit, which includes its WynnBet online sportsbook, at a price of $500 million. That’s a far cry from the $3.2 billion the business was valued at in a now-collapsed deal to bring it public via a merger with special purpose acquisition company (SPAC) Austerlitz Acquisition Corp. I (NYSE:AUS).
Since that speculation emerged, Wynn hasn’t publicly commented on it, and some analysts chimed in, saying it’s unlikely the Las Vegas-based company divests Wynn Interactive at such a low price.
In the Bloomberg interview, Billings doesn’t comment on potentially selling the online gaming division. But he notes the operator wants take a breath and a more pragmatic view of sports betting.