Deutsche Bank Initiates Coverage on Wynn Macau with a Buy

November 9, 2009 3:45 PM EST

Deutsche Bank initiates coverage on Wynn Macau (HKSE: 1128.HK) with a Buy.

Deutsche analyst says, "Wynn Macau is the largest casino property in Macau by gaming revenues. In 1H09, it captured 16% of the city's HK$50bn gaming market. It is also the most profitable, earning a property EBITDA of HK$1.8bn (before corp expenses) in 1H09. With the opening of Encore in 2010, we forecast the company's EBITDA to increase by 22% to HK$4.0bn. We set our target price at HK$11.1 based on 15x 2010E EV/EBITDA. Initiate with Buy, underpinned by the company's premium brand and premium product.

"We expect the Macau gaming market to grow 20% to HK$135bn in 2010. Wynn Macau is scheduled for an expansion in November 2009 (vs previous guidance of 1Q2010), followed by the opening of Encore in April 2010. This should increase table capacity by 24% by mid-2010. Market share is likely to improve from 16% in 1H09 to 17% in 2010. Wynn Macau has a well-capitalized balance sheet with strong operating cash flow...Target price set at HK$11.1."

Note - Related stock, Wynn Resorts (Nasdaq: WYNN), is trading up almost 6% today.

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