4Q23 Results Exceed Consistent Expectations
Wynn Macau announced 4Q23 results: net revenue of US$911 million, up 379% year over year, up 11% month on month, and recovered to 82% of 4Q19. Adjusted property EBITDA was US$297 million, a year-on-year positive increase of 16%, and recovered to 85% in 4Q19, exceeding Bloomberg's agreed estimate of US$281 million.
We believe that Wynn Macau's performance was due to: 1) Driven by high-end midfielders, Midfielder's return to 117% of 4Q19; 2) Midfielder's market share increased after the renovation of Wynn Macau (Peninsula Properties); 3) the increase in EBITDA profit margins, benefiting from an increase in the share of midfield businesses with higher profit margins and a decrease in operating costs compared to the same period in 2019.
Development trends
Highlights of the management public performance conference call are as follows:
1) In January 2024, improved revenue structure, strong revenue growth, and continued cost control continued to drive up EBITDA profit margins;
2) The high-end midfield business continues to drive recovery, while ordinary midfielders began to show signs of further recovery in 4Q23, benefiting from short-term passenger traffic improvements (the improvement will continue until January 2024); 3) Management believes that retail tenant sales continue to perform well, and the retail industry in Macau, China has become an alternative to Hong Kong, China;
4) The company expects total capital expenditure between US$350 million and US$500 million in 2024 and 2025; 5) The company expects average daily fixed operating costs to remain at around US$2.6 million (down 14% from 2019 levels).
Profit forecasting and valuation
We maintain our 2024 adjusted EBITDA forecast and raised the 2025 adjusted EBITDA forecast by 1% to US$8.491 billion, mainly considering a faster recovery in performance than expected and an increase in profit margins. The current share price corresponds to 10 times 2024 EV/EBITDA. We maintain our outperforming industry rating and target price of HK$9.50, which corresponds to 12 times 2024e EV/EBITDA, and has 39% upside compared to the current stock price.
risks
The recovery is likely to be slower than expected; market share may be lost due to increased competition in the industry.