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Wynn Resorts To HK IPO 20 pts Off Wynncore Macau

Numerous news outlets are reporting that Wynn Resorts will be offering 20% of its Macau operations on the Hong Kong Stock Exchange with an investor roadshow leading to a Wynn Macau IPO on October 9th.

The WSJ/Dow Jones - who claim to have seen a term sheet - say that Wynn Resorts will be offering 3.75 BILLION (yes, with a B) shares, with the option to add another 500+ million should there be great demand. Pricing of "Wynn HK" is currently unknown.

Wynn HKG Offering

Looking at fellow Macau concession holders who are listed on the HKG - Galaxy Entertainment (0028), SJM Holdings Limited (0888) and AMAX Holdings (0959) - doesn't really shed much light on what Wynn's IPO will be priced at.

As of this writing, HK$7.75 = US$1. If Wynn offered its 3.75B shares valued at SJM's current prices (HK$4.14) it would net HK$15.5B, thereby giving Wynn Macau (+ Cotai?) a valuation of HK$62B (about US$8 billion dollars).

Seems a little low to me.

The obvious question... what is Wynn Resort's plan to use the cash? A possible phase 2.5 optimization of Wynn Macau, which would tie the entire property together better? Put the pedal to the metal in Cotai? Pay down Macau related debt? Skim some cream off the top?

Exciting?

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Comments & Discussion:

The figure I've heard on several occasions, is $1 Billion dollars. Will that number differ substantially, I can't say. As to what Wynn will do with the money? I think it depends on a few things. I don't know if that money has to stay in China? If it does, then I'm sure it will go towards the Cotai project. There isn't that much debt at Wynn Macau, Encore Macau is mostly being funded from current cash flow. As I recall, Wynn Macau only carries about $500m in debt, and since the property averages about that same amount in annual profit, I don't see them paying down that debt. And lets keep in mind, that property is cash flowing $500m annually, before the addition of Encore. I'm guessing Cotai, will run $3 Billion-ish, and I would say this money would help cover a substantial amount of that, between their cash flow and existing credit lines, they could easily come up with the balance.

On the outside chance, they take that new IPO money out of the country, there is any number of uses. First and foremost, they could just pay down Wynn Resorts debt, mostly for Wynn LV. They could also use that money to put towards their NY project, should it come to fruition. No way they move forward on the golf course at this point, first of all, its a $6-7 billion dollar project, and that might be on the low end, and they simply wouldn't want to start a project like that in Vegas at this time. At least not until they see the full impact of the opening of CC, Cosmo, and maybe FB. Lastly, if we want to dream a little... I believe that Bellagio is worth between $3-4B, and probably much closer to $4. With this IPO, and the current cash Wynn holds, they could cover almost half the purchase in cash, and have enough in open credit lines, to cover the balance. This is a very long shot, but anything is possible. I really don't think Wynn wants Bellagio that bad, and unless he could steal it, I don't see it happening. MGM's day of major desperation also appear to be behind them, perhaps if Wynn would have had this money earlier this year, at the peak of their disaster, they could have done a deal, but I think that small window has closed.

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