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Wynn Stock Setup encouraged at Macau, iGaming IPO

Publication date: May 11, 2021, 08: 47 hrs.

Last updated: may 11, 2021, 09: 51 h.

Todd Shriber

On another gloomy day for the broader gaming complex, Wynn Resorts (NASDAQ: WYNN) shares stand out with a modest gain on Tuesday. The operator is winning praise for its encouraging Macau results and its decision to take its online gaming division public.

Wynn Stock
A man walks in front of Wynn and Encore on the Las Vegas Strip during a pandemic. Analysts are warming on the stock for a variety of reasons. (Photo: Las Vegas Review-Journal )

After releasing its first-quarter results yesterday after the U.S. markets closed, the Las Vegas-based casino operator said it is merging its Wynn Interactive unit with a special purpose acquisition company. (SPAC) Austerlitz Acquisition Corp. I (NYSE: AUS). The deal prepares the ground for iGaming to become a free-standing public company while creating value for Wynn investors.

We actually likes this deal because it gives WYNN's current shareholders the opportunity to participate in the huge potential growth associated with sports betting / iGaming, while breaching the event path of gaining significant market share, " said Stifel analyst Steven Wieczynski in a note to clients today.

He rates Wynn stock a "buy" with a $ 157 price target. At least three other analysts raised their price forecasts for the Encore operator today, in part because of news of Wynn Interactive's announcement.

The deal with Bill Foley's Austerlitz acquisition puts the company's value at $3.2 billion in the online gaming industry, or 4.5 times estimated 2023 sales. It is expected to close later this year with Wynn Interactive's listing on the Nasdaq Stock Market under the symbol "WBET."

Macau revives Wynn Stock

These days, it's easy for analysts and investors to get caught up in the confusion surrounding iGaming and sports betting. But Wynn has only recently been building those businesses.

The company continues to be rated primarily as a land-based casino operator, heavily dependent on Macau's Special Administrative Region (SAR). Wynn's first quarter earnings before interest, taxes, depreciation and amortization (EBITDA) improved by 44 million sequentially, providing some signs that the world's largest gaming hub is finally changing for the better amid a frustrating recovery from coronavirus.

"We don't want to sit here and try to say that Macau has reached an inflection point , given that over the past year investors have been burned by false tricks around the market recovery, "said Wieczynski. "However, once you start to understand some of the impressive visitor/spend/profitability statistics that management has put out for both April/May (more so than May), you have to sit back and wonder if finally the market will really start to accelerate from here. "

Wynn Macau generated $3 million in EBITDA during its recent Golden Week celebrations, CEO Matt Maddox said.

Don't Forget Boston

In the U.S. , Wynn operates its integrated resort of the same name and Encore on the Las Vegas Strip and Encore Boston Harbor. The New England property got off to an impressive start when it opened in mid - 2019. But it wasn't even a year into operation before the coronavirus pandemic hit.

Massachusetts has also had some of the longest pandemic-related casino closures in the US, making it difficult for operators to generate profits. . However, data suggests that Wynn may be turning the corner in that state.

Encore Boston Harbor reported "record quarterly EBITDA of $ 30. 4m (23% margin), which exceeds the consensus (estimate) by 33 percent, "Macquarie analyst Chad Beynon said.

"So far in the second quarter, daily EBITDA is up over 30 percent compared to the first quarter as WYNN has rationalized its cost base. We are looking for properties to generate '21 EBITDA of $194 million (vs. .2 min 2019), "Beynon continued.

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