Wynn Resorts’ Encore Boston Harbor will become a key asset in the company’s portfolio by reducing its reliance on Macau, according to brokerage Sanford C Bernstein.
In an analyst note titled “Letter to the CEO … please do not think again about selling it”, Bernstein’s Vitaly Umansky, Kelsey Zhu and Eunice Lee express surprise at Wynn’s failed talks with MGM Resorts over a potential sale given the upside potential the US$2.6 billion IR offers.
In particular, they estimate the July launch of Encore Boston Harbor will lift the EBITDA derived from Wynn Resorts’ US properties to 41%, of which 16% will come from Boston.
“Boston is too big to be ignored – and Wynn Resorts may finally be perceived as more than a ‘high beta China macro proxy’ trade,” the analysts said in reference to Wynn’s two Macau properties, Wynn Palace and Wynn Macau.
“Encore Boston has the strong potential to become the regional champion and easily outperform other top regional casino properties.”
Bernstein also notes that Encore Boston Harbor has the potential to become a leading destination property, pointing to the fact that overseas passenger arrivals to the city have been growing at 10% CAGR and describing the likes of Mohegan Sun and Foxwoods – located around 100 miles from Boston – as being “nowhere near the same caliber as Wynn’s property.”
“Comparing Encore Boston with other top regional casinos … Encore Boston’s potential is unrivaled – a more favorable tax regime (25% gaming tax rate in Massachusetts), better local demographics and a stronger destination market.”
“At full ramp, we estimate Encore Boston will achieve better results than any other regional property.”