CreditSights keeps tactical 'outperform' on Wynn Macau bonds after weak results

CreditSights Inc maintained its tactical "outperform" recommendation on the US dollar bonds issued by Wynn Macau Ltd despite weaker third-quarter results and an expected rise in capital expenditure in fiscal 2027. The firm said Wynn Macau's bonds trade at levels it finds attractive, while warning of a capex "headwind" for 2027.

Market assessment and relative value

Analysts Nicholas Chen and David Bussey said that, "from a relative-value perspective, those bonds are currently trading, on average, around 58 basis points wider than US 'BB-' corporates with similar maturities, which we find attractive."

CreditSights added that Wynn Macau's 2027 and 2028 issues "trade roughly 14 basis points tighter" than Melco Resorts & Entertainment Ltd's 2028 bonds, a gap within the historical spread between the two credits. The report also notes that "Wynn Macau [Ltd] is currently free of any takeover overhang."

Debt profile and operating results

As of September, Wynn Macau Ltd's total debt load remained flat at US$5.8 billion versus June, comprised of US$4.7 billion of unsecured senior notes and about US$1.1 billion under an unsecured senior revolving facility due September 2028.

Due to weaker third-quarter results in earnings before interest, taxes, depreciation, amortisation and rent (EBITDAR), CreditSights calculated that the company's last-12-month gross and net leverage "weakened slightly to 5.3x and 4.3x", respectively, in September, from 5.1x and 4.2x at the end of June.

Free cash flow also fell year-on-year though remained positive at circa US$105.5 million during the quarter. The analysts added: ">We do not expect a material reduction of the company's debt in the near term, and any improvement in leverage would be driven primarily by an increase in EBITDAR." They also expect free cash flow to remain positive in Q4 2026.

Capex and projects in Macau

The CreditSights team said the "primary headwind" for Wynn Macau Ltd will be the expected increase in capital expenditure from fiscal 2027. Parent company Wynn Resorts guided capex for Macau of US$750 million to US$800 million for fiscal 2027, versus a top-end US$400 million for 2026.

Projects cited include expansion at Wynn Palace —including the hotel tower The Enclave, described by the group as a US$950 million project with 432 suites and a likely opening in early 2029— and an entertainment and theatre complex. CreditSights noted these projects "would impact free cash flow generation," but said the spending "is not unknown as the company already disclosed capex for fiscal 2027 during its Q4 2025 results in February 2026."

"Free cash flow also fell year-on-year though still positive at circa US$105.5 million during the quarter," Nicholas Chen and David Bussey wrote.

"We opine [this] has already been somewhat priced in by the market," the analysts added in reference to the disclosed capex.

Wynn Macau operates Wynn Macau on the peninsula and Wynn Palace in Cotai, and the report also referenced event-related regional risk tied to MGM China Holdings Ltd and its parent MGM Resorts International.