Wynn Palace cannibalization underestimated: MS

Wynn Palace’s cannibalization of its Peninsula casino’s premium mass and VIP businesses is underestimated, said brokerage Morgan Stanley in a note on Sunday.

In its recent Macau trip, the brokerage said it was also concerned with the ramp up of Wynn Palace, which could be slower than expected due to slow market growth and a focus on the premium market – which is still declining.

“We believe it is much more difficult to ramp up a new property in a low growth environment, based on Studio City’s and Galaxy Macau Phase 2’s performances.”

The brokerage also reaffirmed that Cotai will continue to take mass market share from the Peninsula as hotel supply rises, which could spell out self-cannibalization for Wynn Macau.

“Also, we are concerned about cannibalization of its own Peninsula casino,” said the brokerage. “[We] witnessed customer movement between Peninsula and Palace for Wynn. This is similar to the case of Studio City cannibalizing City of Dreams since its opening.”

In regards to Wynn’s opening last week, the brokerage reported that SJM Holdings, MGM and City of Dreams did not see much impact last week, but says MGM could benefit in the near term given Wynn Macau’s constraint of 270 tables vs MGM’s 427.

Morgan Stanley said they favored Sands over Wynn, due to stronger non-gaming earnings, lower cost structure, betting location and accessibility, and Sands’ focus on grind mass vs premium segments.