Posted: October 8, 2024, 03:03.
Last updated: October 8, 2024 03:07h.
Wynn Resorts (NASDAQ: WYNN)’s recently approved casino resort in the United Arab Emirates (UAE) could be a significant contributor to the operator’s long-term free cash flow.
Construction on Win Al Marjan Island. Analysts say the property could make a significant contribution to the operator’s free cash flow. (Image: Wynn Resorts)
In a new report for clients, CBRE Equity Research analyst John Decley said Wynn Al Marjan Island will cost the Las Vegas-based parent company more than $350 million a year when it matures. We estimate that the company could generate free cash flow (FCF) of Construction on the venue began early this year and is scheduled to open in early 2027.
Based on the company’s 40% ownership and management agreement, we estimate that Wynn Al Marjan Island, once fully stabilized, could contribute more than US$350 million in FCF to Wynn,” CBRE said. the analyst said.
Previously, some analysts have estimated that Win Al Marjan Island could generate up to $1.4 billion in annual gross gaming revenue (GGR), assuming more gaming facilities are approved. The broader UAE casino market is then expected to reach annual GGR of $3 billion to $5 billion.
Wynn has not yet received UAE credit
Last Friday, the UAE’s first gaming regulatory body, the General Commercial Gaming Regulatory Authority (GCGRA), approved a license to operate a commercial gaming facility on Win Al Marjan Island. This is the first recognition in the history of a Middle Eastern country.
Still, analysts including Decree argue that Wynn stock is undervalued as a UAE venture, despite the property’s potential to become a major source of revenue when it matures. are. Additionally, Wynn may have a temporary monopoly in the region as no other casino licenses have been approved at this time, giving Wynn an advantage over potential rivals entering the emirate. It shows.
“So far, investors have not trusted Wynn Resorts with regard to Wynn Al Marjan Island, which could generate approximately $920 million in earnings before interest, taxes, depreciation, and amortization (EBITDA). We estimate that there is,” Dicley wrote.
The analyst said interest in Wynn shares could rise again if the UAE permit is approved. Wynn owns 40% of the $4 billion UAE project and is expected to self-finance commitments of approximately $900 million.
UAE takes pragmatic approach to gaming
Perhaps one reason why investors have not fully valued the Wynn Al Marjan Island integrated resort in Ras Al Khaimah (RAK) is because the UAE has shown no intention of opening the floodgates to casino gambling.
“Due to cultural sensitivities towards gaming in the region, we do not expect widespread formal legislation to decriminalize gaming, at least not yet,” Dicley added. “The UAE has been very thoughtful and cautious in its approach and we remain fully satisfied with the legislative and regulatory situation.”
Analysts rate the stock as a “buy”. Wynn will hold an event today at its flagship integrated resort on the Las Vegas Strip to discuss the UAE project with analysts and institutional investors.