It’s earnings-report time for Wynn Resorts and JP Morgan analyst, Joseph Greff, for one, is feeling blasé about the numbers. “Overall, we’d characterize the quarter as in line with investors’ recent expectations, and its earnings conference call outlook commentary as appropriately hinged on a resumption of travel that is predicated on a decline of COVID-19 infection rates and an acceleration of vaccination rates,” he wrote. Luckily for Wynn, its preferred Macao sector (premium mass-market) is outperforming the mass-market and VIP ones. While Sands China saw a 61% plunge in table-game wagering, Wynn had a victory of sorts by being down only 51%. Wagering volumes in Las Vegas were described as “impressive,” thanks to weekend play and California drive-in business. 4Q20 table game and slot handle were 72% and 85% of comparable 2019 levels, which bodes well for recovery. Still, Greff thought cash flow would be “stuck” at recent levels until Coronavirus vaccines are more widely promulgated.
The Morgan analyst shaved five bucks off his target price for WYNN, to $119/share, but encouraged buying on any downticks in the stock. Early-2021 cash flow projections were more optimistic for Wynncore (-4%) than Macao (-27%), but rosiest of all for Encore Boston Harbor, given a 16% boost. Internet gaming is slow to obtain traction, posting a $38 million negative return on investment. Looking over the horizon, Greff sees Wynncore gaining 5% more cash flow, bringing it to 93% of 2019 levels. Macao is dicier, only 83% of 2019 levels, led by slot play. VIP win is predicted to be 36% of 2019. At least Wynn Palace appears to have turned the corner, dwarfing Wynn Macau in EBITDA. Cash flow from all sources was $70 million for 4Q20, with Macao contributing $39.5 million and Vegas $21 million (on $173 million in revenue). Those numbers were above expectations and, going forward, “3Q/4Q events are hanging in (at least for now).” Whew.
Although Encore Boston Harbor also did better than expected, the good news is still ahead, as Massachusetts Gov. Charlie Baker (R) has raised capacity restrictions from 25% to 40% and will allow the casino to operate ’round the clock. Deutsche Bank analyst Carlo Santarelli busted out the raw numbers from the various Wynn properties, showing Wynncore running at a dismal 34% occupancy, with average daily rates of $305 (insane, given the context) and room revenue of $104 (-64%). Strip table wagering was $296 million (-28%) with win of $72 million (flat, which is good). Coin-in at the slots was $802 million (-15%) for win of $47 million (-25.5%), still an above-industry-average win/slot/day of $319, even if that was down 17.5%. Retail and dining sucked wind, plummeting 66% to $58.5 million, although the absence of entertainment surely detracted more than anything else. Wynn Macau grossed $182 million and Wynn Palace $221.5 million, down 65.5% and 62.5% respectively. Encore Boston Harbor won $104 million, off 38.5%, which could be said to be above expectations.
While he was relatively cool toward Wynn Resorts, Greff flipped out over Penn National Gaming, ratcheting his price target up to $134/share (from $113). Why the enthusiasm? Sports betting and i-gaming, breakout performers of which Greff hasn’t seen the like since the boom in riverboat casinos 30 years ago. He points to Penn’s 15% market share in two states (Pennsylvania and Michigan) where its OSB has gone live. The company says it is “well below” the $300-$800 cost of acquiring a customer that its rivals face. “On the land-based casino side of things, PENN’s 55 year-old and older demographic is just starting to reemerge after a COVID-19 hibernation, a segment whose recovery should be accretive to visitation frequency, spend per visit, and overall margins. This should be the next leg of recovery,” he concludes. Throw in savage, pandemic-era cost cuts and Penn seems to be sitting pretty.
Being down 11.5% in January doesn’t initially seem like cause to break out the bubbly but, at least for Maryland, it suggests that negative trends are abating and the ‘skinny stimulus’ put a few more bucks in consumers’ gambling budgets. The Free State grossed $129 million, which is impressive considering that the three biggest casinos were capped at 25% occupancy, the small ones at 50%. The battle for market share tightened between MGM National Harbor (39%) and Maryland Live (37%), leaving crumbs for Horseshoe Baltimore. MGM won $50.5 million (-14%), with table games down 11% but slots slipping 16%. Maryland Live won $48 million, off 8%, while Horseshoe Baltimore was a dumpster fire, tumbling 29% to $14 million. Of the small fry, only Rocky Gap Resort was revenue-negative, down 5% to $4 million. Hollywood Perryville leapt 12% to $7 and Ocean Downs gained 6% to $6 million. Over in West Virginia, it was a different picture with slots (-23%) dragging down the statewide average as tables shed 18%. Hollywood Casino underperformed the state, stumbling -27%.
Whether it’s stimulus money or Gov. Kim Reynolds‘ head-in-the-sand attitude toward Covid-19, Iowa casinos were bubbling last month, up 13% to $128 million. Racinos were flat but land-based casinos gained 19%. What’s more, the Hawkeye State was coming off a strong comparison (+10% in January 2019). Top performer in the state was Horseshoe Casino with $15 million, up 8.5%, rivaled most closely by Prairie Meadows racino’s $14 million (-10%) and Ameristar Council Bluffs‘ $13 million (up 2.5%). Overall, Caesars Entertainment properties were up 10% and Boyd Gaming riverboats 21%.
Sports betting also impressed, coming up just short of $150 million in handle. 81% of that action was placed online. “January was the just first test of an unshackled market, but it didn’t take long to realize just how much Iowa’s sportsbooks have been held back by the state’s in-person registration requirements,” marveled PlayUSA analyst Dustin Gouker. Diamond Jo Worth led the walk-up market with $7 million in bets. Overall betting was a contest between Wild Rose, whose skins include both DraftKings and BetRivers (33% market share and $40 million online handle) and William Hill/Prairie Meadows ($40 million handle and $3 revenue). Diamond Jo, affiliated with both FanDuel and BetMGM, drew $27 million in online wagering. Overall, Iowa casinos notched $8.5 million in sports-betting revenue, well up from December’s $4.5 million, with DraftKings’ market share calculated by Credit Suisse analyst Ben Chaiken at 24%. Since hold percentage (7%) was the same as December, Chaiken called the January numbers “just a function of demand.” But what a function!
Although our Atlantic City correspondent has been a frequent customer to Philadelphia Live, he was underwhelmed by the grand opening, writing that it was the most lightly attended evening of all. “I happened to note I didn’t see any Asian gamblers, like you always see in A.C. Today, local TV featured Philly Live, but no line of people to get in. I got an email stating I would have to earn 250,000 credits by the end of April or May to maintain my upgraded tier. Their system is $1 per credit. Do they think South Philly is in Macau or Singapore? The ‘Jade’ card is $1M-$2M yearly, and they have a higher level card. [Emphasis added] Like their brochure stated, ‘let the benefits do the talking’ (no entertainment, only 2 casual restaurants open). Certainly all talk, no action.”
Saipan flies pretty low on the S&G radar and when it does blip it’s usually bad news. Global Gaming Business minces no words about the jurisdiction, calling it “a disaster,” its megaresort plans “in shambles.” Imperial Pacific Palace is described as unfinished, “in danger of ruin.” Reporter Marjorie Preston likens it to the Baha Mar debacle, from which Caesars Entertainment narrowly escaped. According to casino analyst Brendan Bussmann, Saipan could turn things around … providing that the gaming monopoly gets a new operator with “a strong plan.” See GGB‘s article for the juicy details of what Bussmann describes as “a multi-car pileup” that includes defaulted high-roller debt and unpaid CEOs, just for starters. Bussmann’s curative involves looking beyond China for players and less reliance on high rollers, who tend to have a short “shelf life.” Things could hardly go worse—could they?