We all know that Wynn Resorts has been operating in Macao, running two-thirds of its activities in the area. What we didn’t know was that it has expansion plans.
Word is out that the company plans to spend two billion on Crystal Pavilion. Analysts are standing by to see what happens.
Big expansion plans
The impending grandiose project will be housed near Wynn Palace with construction slated to start in 2021 and ending in 2024.
It will include an innovative architectural design with an all-glass structure, two-phased hotel towers with a total of approximately 1,300 rooms and suites along with one-of-a-kind public entertainment attractions.
The Crystal Pavilion will be a must see with its two towers, ample performance space, gardens and interactive sculptures. A mammoth museum and theater will draw visitors near and far.
Qualms are rising over the project
According to the JPMorgan analysts, some concerns have been voiced. The target return on investment is 15 to 20%, implying incremental EBITDA [earnings before interest, taxation, depreciation and amortization] of $300 to $400 million from phase one alone.
“It will mean a 35-percent to 47-percent boost in the trailing 12-month EBITDA at Wynn Palace which seems a bit aggressive
for primarily non-gaming expansion.”
Wynn Resorts has other on-going projects, among them the Encore Boston Harbor in Massachusetts. The company is meanwhile seeks a gaming license in Japan. Can it handle all this activity successfully?
If Wynn is selected for an integrated resort in Japan, construction will probably start within twelve to twenty-four. According to Namura analysts noted, Wynn’s “discretionary free cash flow” target of $1.68 billion, at $16 per share, in 2021 is a consolidated number.
“Adjusting for non-controlling interests in Macau, we estimate Wynn’s ‘true’ free cash flow per share target in 2021 is closer to U.S. $11.40 per share.”
In the long run, Wynn Resorts has time to prove its value and integrity. The Macau concession ends in 2022, but don’t expect Wynn to bow out. The proposed Japanese integrated resort could also be a good fit for its mission. Only time will tell.