Wynn Focuses on Macau During Call - Monday 27th of February 2006

by Howard Stutz

Las Vegas Gaming Wire

LAS VEGAS Wynn Resorts Chairman Steve Wynn was more interested Thursday afternoon in discussing the casino company's prospects in Macau than the gambling operator's fourth-quarter earnings.

Returning from a weeklong inspection of the company's under-construction $1.1 billion hotel-casino, coupled with evaluating other gaming development prospects, left Wynn anything but jet-lagged.

"The past week was very fruitful and eventful," Wynn said on a conference call with analysts and investors after Wynn Resorts Ltd. released its fourth-quarter results for the period ending Dec. 31, which also detailed the first 248 days of operation of the $2.7 billion Wynn Las Vegas.

"We made some very important strategic decisions. Our goal is to take our show on the road to Macau and do a good job there."

Wynn said the initial phase of Wynn Macau will open Sept. 5, but he won't hesitate to delay the opening by a few weeks or even a month if he doesn't believe staffing and service levels are up to his own personal standards.

"It's all about training, it's all about service and it's all about the people, and I want to be sure we enter the market with a better level of service than is already there," Wynn said.

Wynn Macau, he said, would open with 200 gaming tables, mostly baccarat tables. Within 12 months, another 300 gaming tables, predominantly baccarat, would be added to the casino.

Wynn also said the company is in the final stages of receiving the concession from the Chinese government to develop 54 acres on Macau's neighboring Cotai Strip, enough land he said for three hotel-casinos. Las Vegas Sands Corp. is developing eight hotel-casino sites on the Cotai Strip.

Wynn told analysts that Wynn Resorts would manage all three potential Cotai properties, but the company wouldn't be adverse to taking on partners in the development.

The Macau discussion dominated the earnings announcement, in which the company reported its fourth-quarter net loss per share was 12 cents and $1 per share for 2005. The company said its net loss was $11.4 million in the quarter and $98.4 million for the year.

Wynn executives said pre-opening expenses, the term the company uses for capital expenditures and property upgrades, were $16.5 million during the quarter for Wynn Las Vegas, Wynn Macau and its planned $1.4 billion Encore project, expected to break ground next to Wynn Las Vegas this spring.

The preopening expenses cut into the company's earnings, which would have been 5 cents per diluted share. Analysts polled by Thomson First Call had predicted Wynn Resorts would earn 8 cents per share in the quarter.

"When you open one of these hotels, you immediately find out what works and what doesn't work," Wynn said. "We don't hesitate about stepping up and fixing something."

The company remodeled the Corsa Cucina restaurant and tore out the Le Bete nightclub, replacing the attraction with the new Tryst nightclub.

"When we make these property changes, we look at them with the expectation of growing top line revenues," Wynn Resorts President Ron Kramer said.

In operating Wynn Las Vegas since April 28, the company reported net revenues of $269.4 million in the fourth quarter and $722 million for the year.

Cash flow at Wynn Las Vegas, defined as earnings before interest, taxes, depreciation and amortization, was $81 million in the fourth quarter and $212 million in 2005.

"Since its inception in April, Wynn Las Vegas has dominated the market in most of the key areas," Wynn said.

In its earnings statement, Wynn Resorts said the Strip property in 2005 generated a table game win per day of $8,244 per table and a slot machine win per day of $254 per machine. The hotel's 2,700 rooms averaged $274 per room night.

The casino's net gaming revenues in 2005 were $353.7 million on $1.26 billion wagered on table games and $2.4 billion wagered in slot machines.

The company said the planned Encore, which will be operated as an extension of Wynn Las Vegas, had been redesigned to include a 2,054-room hotel tower and 44,000 square feet of casino space and could open by the end of 2008.

Wynn Resorts announced earnings after the stock markets closed Thursday. Shares in the company finished the session on the Nasdaq National Market at $66.50, down 91 cents or 1.35 percent.

None of the questions on the conference call dealt with last week's highly publicized announcement that Wynn Las Vegas would shut down production of the Broadway show "Avenue Q" in May, and remodel the theater to house another Broadway show, "Monty Python's Spamalot."

Wynn said the cost to renovate the theater would be $10 million.

"We believe the company will ultimately be saving money, as it will not have to build an entirely new theater," said gaming analyst Steven Wieczynski of Stifel, Nicolaus Capital Markets in a note to investors.

"The closing of 'Avenue Q' will have a negative impact for the second half of 2006, as Wynn Las Vegas will now only have one show, "Le Reve," for a six-month period. It is hard to estimate what type of financial impact the closing will have. 'Avenue Q' was not a great-performing show, but it did bring customers through Wynn Las Vegas, increasing gaming revenues.

The property will now have to hope that "Le Reve" will be able to bring in more customers offsetting the loss of 'Avenue Q.' "

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