Wynn Macau's Cash Flow Strategy for 2025 Expansion

Wynn Macau Ltd, the well-known casino operator in Macau, is projected to sustain positive free operating cash flow into the fiscal year 2025. This optimistic outlook is grounded in financial analyses by CreditSights, a renowned credit research firm, which has outlined that the company’s cash flow will adequately cover its anticipated capital expenditures for the year. Following the release of the 2024 fourth-quarter results by its parent company, Wynn Resorts Ltd, these projections have caught the attention of industry analysts and stakeholders. Wynn Macau Ltd operates two significant properties in the region: the Wynn Macau resort in downtown Macau and the Wynn Palace located in the vibrant Cotai district.

Capital Expenditure Plans and Financial Projections

Wynn Resorts Ltd noted in its quarterly presentation that Wynn Macau's capital expenditure (capex) for the current year is expected to fall between US$250 million and US$300 million. Looking ahead to 2026, projected capex could increase to between US$450 million and US$500 million. These funds will support several investment projects at Wynn Palace, such as developing a new dining hall, creating an event and entertainment center, and launching a theater along with a resident show. Additionally, Wynn Macau has set aside US$70 million to US$80 million for maintenance capital spending for the ongoing fiscal year, after having spent US$165 million in 2024. This aligns with the company’s strategic expansion and service development plans.

According to CreditSights analysts Nicholas Chen and David Bussey, despite the lack of a detailed breakdown of cash flow elements in the 2024 fourth-quarter reports from Wynn Resorts, it is evident that Wynn Macau's free cash flow has not only turned positive post-pandemic, but it is also positioned to cover the future capex smoothly. They highlighted an anticipated EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent) growth of around 23 percent year-on-year for the fiscal year 2024. With such robust growth in EBITDAR, Wynn Macau is on track to maintain positive free operating cash flow through 2025, effectively managing its upcoming investments.

Ongoing Development and Financial Improvements

The analysts from CreditSights further anticipate that the ongoing development of the food hall at Wynn Palace will slightly boost Wynn Macau’s revenue and EBITDAR, particularly in the latter half of 2025 upon project completion. Although the contribution from dining and beverages will only account for a small fraction of the overall revenue, this enhancement is still expected to positively impact the financial performance. The projected completion for this venture is set for mid-2025.

Moreover, Wynn Macau's financial leverage situation appears to be improving, primarily due to strategic debt management, including redeeming its US$ 600 million, 4.875-percent notes in October. Consequently, Wynn Macau's total debt by the end of December 2024 was reduced to US$5.9 billion, a significant drop from US$6.5 billion at the end of September, alongside an increase in the unrestricted cash balance from US$1.3 billion to US$1.5 billion over the same period.

Additionally, CreditSights pointed out that Wynn Macau's liquidity is further reinforced by US$354 million available through its revolving credit facilities. By the end of 2024, the company improved its debt/EBITDAR ratios compared to earlier in the year, demonstrating financial resilience and stability as it continues to navigate post-pandemic recovery challenges, although still not reaching 2019 pre-pandemic levels.

Source: Wynn Macau Ltd’s free cash flow from operations sufficient for 2025 capex: CreditSights, GGRAsia, February 17, 2025.

Posted by Wizard
Feb 17 2025