Wall Street Applauds Wynn's Macau Deal - Thursday 9th of March 2006

by Howard Stutz

Las Vegas Gaming Wire

NEW YORK Wall Street gave Wynn Resorts Ltd. its stamp of approval Monday following a weekend announcement that the Las Vegas-based company had sold a subconcession to operate casinos in Macau to a rival gaming developer for $900 million.

Shares of Wynn Resorts, traded on the Nasdaq National Market, soared during Monday's session, closing at $72.24, up $7.83, or 12.16 percent.

Wynn Resorts announced its deal Sunday, and in the first day of trading since the news almost 6 million shares were bought and sold, six times the normal daily volume.

By the middle of the trading day, the value of Wynn Resorts shares had climbed 16 percent before retreating. During the session, Standard & Poor's announced it might upgrade its rating on the company.

Wynn Resorts, which operates Wynn Las Vegas and is building a $1.1 billion hotel-casino in Macau, sold its subconcession in a cash transaction to Publishing and Broadcasting Ltd., an Australian company controlled by the family of business magnate Kerry Packer, who died in December.

The deal, which is subject to approval by the Macau government, allows PBL, one of Australia's largest media and entertainment corporations, to operate casinos in Macau and the neighboring Cotai Strip.

Wynn Resorts Chairman Steve Wynn said Monday he had "daily offers" from competing casino companies for the subconcession.

He said the proposal by Packer's company, which operates Australia's two largest casinos, the Crown in Melbourne and Burswood in Perth, was the right opportunity for both Macau and Wynn.

"Gaming is a business that thrives on high-class competition, and that is what the Packers do; they take the high road and build resorts, not just a box with baccarat tables," Wynn said. "These are people that will make Macau stronger and that was the basis of my decision, finding someone who would be good for Macau."

Packer's company could build a casino in Macau next to Wynn's under-construction Wynn Macau, the first phase of which is expected to open Sept. 5 with 600 hotel rooms and a 100,000-square-foot casino.

"Whatever (PBL) does in Macau will enhance our property and enhance Macau," Wynn said.

Gaming analysts agreed.

"PBL will now develop and operate their two planned casinos under this subconcession," Goldman Sachs gaming analyst Steven Kent said in a note to investors.

As one of three primary gaming license holders in Macau, Wynn Resorts had the right to grant one subconcession to another casino operator.

The other two gaming license holders, Galaxy and the corporation controlled by controversial Chinese businessman Stanley Ho, had already sold their subconcessions.

Galaxy's was sold to Las Vegas Sands Corp., while a joint venture between Stanley Ho's daughter, Pansy Ho, and MGM Mirage, bought the other subconcession.

The subconcessions were sold for approximately $200 million each and the Macau government has reportedly said it will not offer any more subconcessions until at least 2009, which drove up the price of Wynn's subconcession.

"This announcement was not a complete surprise," Deutsche Bank gaming analyst Marc Falcone said in a note to investors Monday. "The value for the subconcession was greater than anticipated (more than $500 million) and larger than previous Macau agreements."

The news drove up the stock prices of other casino companies with Macau interests. Shares in Las Vegas Sands closed at $56.63 in trading on the New York Stock Exchange, up $3.18 or 5.95 percent. MGM Mirage was up $1.32 to close at $39.51, a 3.46 percent increase.

Stifel, Nicolaus Capital Markets gaming analyst Steven Wieczynski said the $900 million price reflected more than $9 per share on Wynn's stock price on a pretax basis.

The $900 million sale comes at an opportune time for Wynn. The company hopes to break ground this spring on the $1.4 billion Encore project, a 2,054-room expansion of Wynn Las Vegas that could open by 2008.

In addition to its Macau project, Wynn Resorts is seeking approval to build on three casino-hotel sites on the Cotai Strip, a parcel of reclaimed land that neighbors Macau. Wynn said Monday the company could build a fourth Cotai casino. Wynn said the company would look at having joint venture partners in its Cotai plans.

"Obviously this means capital for our company but we don't have problems getting capital, so this wasn't the issue," Wynn said.

"We looked at this deal as the proper thing to do for the community by bringing another strong casino operator to Macau," he added.

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