Wynn Resorts’s in-progress mega resort-casino on Al Marjan Island in Ras Al Khaimah, United Arab Emirates, is worth an additional $10 to the share value of the company, according to J.P. Morgan analyst Joseph Greff in a full-color investor note published Friday. Wynn shares were trading at $97.71 at the time the report was released.
“We think progress is being made with respect to gaming-law enactment, a gaming license being issued, property-level financing being secured, partner-equity contributions, and construction. As such, we think investors will start to assess and ascribe the net equity value here,” Greff wrote.
In addition to holding a 40 percent stake in the UAE project, Wynn also stands to receive fees for managing the resort. Greff cited a “large quantum of a geographically proximate wealthy population” in arriving at his 10 percent figure and identified the Middle East as the next growth area for casino gambling.
Greff compared the Emirates to Singapore, pointing to several similarities. They included a tourist market that “skews toward high ultra-wealthy travelers,” restricts the casino floor to a small percentage of the overall resort footprint, and has little gaming competition in the area. At present, Wynn would have the Emirates all to itself.
The analyst applauded the Emirates’s formation of a General Commercial Gaming Regulatory Authority, headed by former MGM Resorts International CEO James Murren. He said he was “encouraged by the leadership team’s general industry expertise and ties to U.S. based gaming operators and regulatory agencies.”
Nor does Greff think this is the end of casino development in the Emirates, referring to CEO commentary emanating from both Wynn and MGM. He predicted that “more news may come before year-end.”
Crunching the Arabian numbers, Greff forecast that Wynn Al Marjan Island would derive 41 percent of its revenue from gambling, closer to Wynn Las Vegas (25 percent) than any of Wynn’s Macau casinos (80 percent). Labor costs would be a wash, with salaries lower, but more workers required.
Wynn Al Marjan Island will have 1,500 rooms, at an anticipated average daily rate of $600 (comparable to Marina Bay Sands in Singapore), escalating to $694 a night by 2030. Revenue per available night will scale up to $625, Greff prognosticated, predicated on 90 percent occupancy. In terms of cash flow, the resort is projected to generate between $450 million and $600 million a year.
Greff hinted at strong fly-in traffic for the resort, observing that Al Marjan is located within an eight-hour flight of 95 percent of the global population. Furthermore, Dubai International Airport is 50 minutes’ drive from the Wynn site and the fourth-busiest airport in the world. Ras Al Khaimah’s airport, while not as busy, is even closer — 30 minutes away.
With regard to licensing of the $2 billion project, Greff wrote, “The timing … is fluid, as much of the process requires educating lenders who have, until now, been unfamiliar with gaming and require clarity. The [United Arab Emirates] is motivated to facilitate the process, given the underlying tourism and economic benefits from this project, which bring incremental demand to other projects in the market, higher employment (and taxes on higher income levels), and higher land values.”
Greff then turned to the two elephants in the tent, MGM and Caesars Entertainment. The latter exited its Caesars Palace-branded non-gaming resort in Dubai this week. It will be rebranded as a Banyan Tree property in November. The company still maintains Caesars Bluewaters Dubai, as well as apartment dwellings on Jumeirah Beach’s Bluewater.
MGM has been kicking the tires on the Emirates since 2017, under the auspices of the Wasl development group, chaired by Mohammed bin Rashid Al Maktoum. The long-term plan is to create Bellagio- and MGM Grand-branded hotels, along with a group of Signature Villas.
Greff recalled that current MGM CEO William Hornbuckle “expressed optimism at a recent industry conference that MGM could potentially be granted a gaming license, noting that a gaming decree was signed, but not yet released. He expects that each of the seven Emirates will be able to choose whether they want to allow gaming.” The company has 150,000 square feet of casino-ready space in Dubai.
Although the analyst allowed for sharia (Islamic law), which has been in place in the Emirates since 1971, he argued that “contentious issues such as alcohol and women’s rights have seen historic changes in regulation, while cities such have Dubai have seen drastic shifts toward westernizing, attracting tourists and residents from around the globe.” The upshot, in Greff’s view, is an environment that, while not historically gambling-friendly, is evolving in the right direction for the gaming industry.
While contending that the Emirates’s about-face on casinos was “significant,” Greff implied that it didn’t necessarily betoken a similar shift in all Islamic countries. At present, he observed, Lebanon and Malaysia permit casinos for the general population, while in Egypt and Tunisia, admittance is restricted to overseas nationals. Income also seems to be an issue: In 2020, Casino du Liban in Lebanon was deriving 80 percent of its revenue from only 15 percent of its customers, mainly tourists.
Sensing that Wynn’s financial projections for Al Marjan Island excluded contributions from the other six Emirates, Greff extrapolated that most of its casino revenues would also come from international tourism, despite the presence of nine million expatriates in the Emirates themselves. “However, we believe, given the concentration of expatriates, regulations could include a clause allowing expat casino visitation under certain circumstances,” he wrote.
The main feeder markets to the United Arab Emirates, Greff enumerated, are India, Saudi Arabia, the United Kingdom, China, and Oman.
