Wynn Macau: Renewed purchase, target price of HK$7.0, giving Wynn US (WYNN US) the parent company of 7.2x EV/EBITDA in 25 years released 24Q2 earnings. Macau (Wynn Macau) net revenue was 885 million US dollars, +15% year over year and -11% month over month. Adjusted EBITDA of $280 million was +14% year over year, -17% month-on-month, and recovered to 82% in 19Q2. The EBITDA margin was 31.7%, compared to 34.0%/32.0%/29.2% in 24Q1/23Q2/19Q2 (the low in 19Q2 was mainly due to the company's VIP business at the time). We forecast the company's 24/25/26 GGR to be HK$29.466/32.043/34.648 billion, recovering to 71%/77%/83% in 2019, with VIP recovering to 23%/25%/27%, midfield recovering to 125%/136%/146%, and slots recovering to 60%/70%/73%. We repeat the purchase, with a target price of HK$7.0, corresponding to a 25-year EV/EBITDA of 7.2x.

The 24Q2 midfield recovery rate exceeded the industry level, but Macau's business growth may gradually peak. After May 1st, the recovery of Macau's GGR accelerated, and the base gradually increased after 23Q2. However, since '24, the GGR recovery has remained flat at 75% for a long time. Combined with MGM's leading recovery in the 24Q2 GR, which also declined month-on-month, we believe that Wynn Macau's business growth may gradually peak. 24Q2 Wynn GGR was $883 million, recovering to 64% in 19Q2 (compared to 77% of the industry). VIP gross revenue of $141 million recovered to 20% (38% compared to the industry), -25% YoY, -23%; Midfield gross revenue of $690 million, recovered to 120% (compared to the industry 114%), +32%, -10% month-on-month; gross slot machine revenue of 52 million dollars, recovered to 60% (compared to the industry 86%), +20% YoY and -10% month-on-month.

In terms of properties, 24Q2 Wynn Palace's revenue was $548 million, accounting for 62% of total net revenue (contributing 59% compared to 24Q1), EBITDA was $184 million, EBITDA margin was 33.7% (compared to 24Q1 34.5%); Wynn Macau (property) revenue was $281 million, EBITDA was $96 million, and EBITDA margin was 28.4% (compared to 24Q1 33.3%).

There was a rebound in sales in July, and diversified activities attracted traffic. The business transformation showed results. Before the pandemic, Wynn's VIP revenue ratio was high, and it also relied more on gaming intermediaries, but now high-end customers have gradually transformed into direct VIPs, high-end midfielders, and ordinary midfielders. Wynn values the recovery of GGR's share in the Macau business. Although no specific data was disclosed this time, it was indicated that the July revenue rebounded and met the company's expectations. We believe that compared to other expo companies, Wynn Guest Rooms and shopping malls are relatively luxurious and can attract high-quality traffic, and that in the second half of the year, the company will launch many rich events such as Entertainment Fairs, Watch Week, Sake Banquets, and Supercar Shows, which are expected to further attract traffic. Therefore, compared to Galaxy, it is easier for Wynn to transform its business from low profit margins to high profit margins.

The number of visitors to Macao in 24H1 reached expectations, and the number of visitors to Macao during the summer season continues to rise, but the gaming industry still has yet to observe that the Macau government's estimated 33 million visitors to Macao in '24 have surpassed half of expectations, reaching 16.72 million, recovering to 82.4% in the same period in '19. Of these, the number of visitors entering Macao during the May 1/ Dragon Boat Festival holiday was 0.604/0.343 million, recovering to 76%/87% in '19, with an average of 0.121/0.114 million visitors per day, more than 0.121/0.114 million. 0.098/0.095 million people in the same period last year. Passenger traffic has continued to rise since the summer season in July. As of the 25th, the number of visitors reached 2.399 million, an average of nearly 0.096 million per day, +9.5% over the same period. The desire of tourists to visit Australia has increased or driven the development of the gaming industry. The 24H1 Macau GGR reached 113.8 billion Australian dollars, which also exceeded the government's estimate of 216 billion Australian dollars in half. Both the number of visitors and the recovery of the gaming industry are expected to meet government expectations. We expect the industry GGR to return to 79%/86% in '19, or A$231/252.1 billion, while VIP GGR and midfielder and slot machine GGR will return to 34%/36%, 118%/130% in '19.

Risk warning: Policy implementation falls short of expectations, competition in overseas gaming markets intensifies, and valuation estimates are biased.