Projects in Macau, UAE are growth drivers for Wynn and Melco, says Texas Capital

Casino operators Wynn Resorts Ltd and Melco Resorts & Entertainment Ltd have several potential catalysts to support future business growth, including new hotel investments in Macau, and the expansion of entertainment offerings and opportunities in international markets, according to brokerage Texas Capital Securities. In a Monday report, analyst David Bain said that despite recent weakness in Macau’s gross gaming revenue (GGR), Wynn Resorts – parent of Wynn Macau Ltd – continued to regard the market as “very solid”, with “strong investment potential”. The brokerage highlighted the Wynn group’s planned Enclave hotel tower development at Wynn Palace, as well as a theatre project, as examples of investments that could support the operator’s future performance in Macau. The assessment followed a meeting with Wynn Resorts representatives earlier this month. At the meeting, the company acknowledged that third-quarter Macau GGR had been slightly below some investors’ expectations, following an initially stronger period after the FIFA World Cup football tournament that ended in mid-July. Texas Capital said the Macau market had experienced uneven gaming revenue trends, potentially reflecting softer macroeconomic conditions in China, challenging year-on-year comparisons and recently clarified tax treatment of offshore accounts. The latter could affect liquidity among premium-mass and VIP gaming customers, the brokerage suggested. Industry checks also indicated possible delays in visa approvals for travel to Macau in some regions, according to the institution. Outside Macau, Texas Capital highlighted the potential contribution from Wynn Al Marjan Island, the group’s casino resort project in Ras Al Khaimah, a member of the United Arab Emirates (UAE). The brokerage said the resort remained on track for a September 2027 opening, based on discussions with Wynn Resorts representatives in early October. Mr Bain said the project’s potential contribution was not yet adequately reflected in Wynn Resorts’ share valuation. The brokerage also pointed to the depth of potential feeder markets for the UAE resort, adding that expectations regarding investment returns had not materially changed despite geopolitical tensions in the Middle East. The US$5.7 billion Wynn Al Marjan Island is being developed by Wynn Resorts alongside local partners Marjan LLC and RAK Hospitality Holding LLC. Wynn Resorts holds a 40-percent equity interest in the UAE scheme. Melco’s expansion Regarding Melco Resorts, Texas Capital identified the fuller opening of the REM hotel accommodation at City of Dreams Macau as a potential catalyst for business growth. The brokerage said the venue’s anticipated opening later this month could provide greater visibility for revenue growth at the property, while operating costs allocated to the venue were expected to decline relative to its initial opening stages. Mr Bain suggested that the third quarter could represent a low point for Melco Resorts’ earnings performance, with property-specific disruption at City of Dreams Macau expected to give way to growth opportunities. The brokerage also highlighted Melco Resorts’ relatively low share valuation and its ongoing share repurchase programme as factors that could support the stock. The casino firm repurchased approximately US$121 million of shares during the second quarter, leaving about US$590 million available under its existing repurchase authorisation. Texas Capital said it anticipated further share repurchases at current equity price levels. The brokerage estimated Melco Resorts’ free cash flow yield at approximately 24 percent and said the company was trading at about 6.5 times its estimated 2027 enterprise value to earnings before interest, taxation, depreciation and amortisation (EBITDA), near an all-time low. Melco Resorts has casinos in Macau and the Republic of Cyprus; and also runs casino operations – alongside local real estate partners – in the Philippines and Sri Lanka. Texas Capital’s projections indicate that City of Dreams Mediterranean and other operations in Cyprus could generate approximately US$76.8 million in property EBITDA in 2027, up from an estimated US$70.3 million in 2026. For City of Dreams Manila, in the Philippines, the brokerage forecasts property EBITDA of US$116.4 million in 2027, compared with an estimated US$126.3 million this year. At group level, Texas Capital forecasts Melco Resorts’ adjusted EBITDA to increase to approximately US$1.22 billion in 2027, from US$1.17 billion projected for 2026.