“Solid … very encouraging … impressive momentum.” Those were some of the things JP Morgan analyst Joseph Greff had to say about Caesars Entertainment‘s 1Q21 numbers. Cash flow of $548 million well exceed Greff’s expected $429 million, to say nothing of the Wall Street consensus of $408 million. The report continued, “we think stronger group volumes, incremental entertainment revenues, banquet/F&B, and overall hotel room pricing will drive continued growth in Las Vegas and the regionals recovery will continue, with, for CZR, a more acute recovery in Atlantic City and New Orleans, which have lagged.” Despite the struggles of Caesars in the latter two markets, Greff believes that the Roman Empire will record $3 billion in cash flow this year, up from his projected $2.4 billion. It looks like CEO Tom Reeg‘s euphoria about the second half of 2021—and Las Vegas in particular—was well-founded. Due to the exceptional strength of January and February 2020, Caesars’ year/year numbers were actually down. Deutsche Bank analyst Carlo Santarelli reports that Las Vegas was 39.5% lower ($497 million in revenue), regionals were off 17.5% ($1.1 billion) and managed/international properties were 30% lower ($94 million). So it wasn’t all sunshine and roses.
As for Caesars’ mountain of debt, Greff foresees “meaningful” retirement of it, nearly $2.3 billion between now and the end of next year. His numbers don’t factor in a Las Vegas Strip asset sale, of which CZR has talked much and done little. (We frankly grow skeptical.) On the other hand, he is optimistic that the company can now capture 10% of the U.S. sports betting market and 15% of i-gaming. He adds that Caesars is nicely exposed to the return of leisure/non-group travel to Sin City, to recovery in drive-in/regional markets “with our anticipation of a return of the 55+ year old customer,” and higher operating margins thanks to Covid-motivated cost cuts. Only Horseshoe Hammond is on the sale block now, although Greff thinks a Strip sale is “likely” next year. If suitors have to wait that long, maybe they should shop around elsewhere on the Boulevard, “which improved sequentially, and meaningfully, over the course of the 1Q21.” In fact, there are no Strip-related sale talks going on at this time.
Speaking of the Strip, Caesars told Greff that “weekends in Las Vegas are sold out for the foreseeable future.” Convention business is trending in the right direction, up 20% starting in July and nudging 15% higher next year. Reno, incidentally, enjoyed its third best month ever in April. The non-U.S. William Hill businesses are up for disposition, and 888 Holdings and Apollo Management are already jostling for the prize, which includes 1,400 U.K. betting shops. Apollo, which lost out for William Hill US is still perceived to have the fatter purse. It would monetize the acquisition by consolidation with Italian Gamenet, setting up cost cuts. Dark-horse bidders include Swedish firms Kindred and Betsson, but Betfred could be blocked due to monopolistic concerns. (An acquisition would give it 3,000 betting shops in Blighty.) Caesars is looking to retire the $2 billion in debt it undertook to engorge William Hill and may even sweeten the pot by throwing its nine British casinos into the deal.
There could soon be a significant new player in the U.S. sports betting industry. Britain’s Super Group has purchased Sports Entertainment Acquisition Corp. in a deal expected to close shortly. It then intends to move on to a takeover of Digital Gaming Corp. The endgame is to access such markets as New Jersey, Pennsylvania, Colorado, Indiana and Iowa. Regulatory approval will, of course, be required. Super Group has the Spin i-gaming brand as well as the OSB vehicle Betway. According to The Associated Press, “Betway has more than 60 brand partnerships with teams, leagues and sport personalities around the world, including NBA teams the Chicago Bulls, Golden State Warriors, Brooklyn Nets and Los Angeles Clippers; the English Premier League football team West Ham United; and the eSports team Ninjas in Pyjamas.” It sounds like Betway has the makings of a serious contender if it’s OK’d.
CurexLab has issued a set of nostrums for safe traveling during the pandemic (sorry, America, it’s still a thing). They include “Choose a destination that won’t have big crowds. Now is not the time to plan to visit a big city where there will be crowds of people [Sound like anyplace we know?] … Try to socially distance where possible. If you see a crowd gathered, go the other way. You can still be social and get involved in things, but try to limit your exposure to a lot of people, especially indoors and where it’s poorly ventilated … Eat healthy, exercise and get plenty of sleep so that your body stays healthier and your immune system stays stronger.” Good luck doing any of the above in Las Vegas or Atlantic City. We hate to say it but if CurexLab is right, a casino is just about the last place you ought to be—although you very much want it these days.
Jottings: Thanks to a vigorous employee-vaccination program (88% success), Wynncore will be allowed to go to 100% of capacity on Monday, the first Strip resort to do so. Reports Eater Las Vegas, “The resort will continue to observe mask, health, and safety guidelines, and staff who have not been vaccinated with continue to take weekly COVID-19 tests” … More—and encouraging—news on the Durango Station front. Joseph Greff reports work will start next year, with an initial allotment of $100 million, toward a final budget of $400 million … Debbie Gibson–with Joey McIntyre in tow—plays The Venetian Aug. 26-28. Citi cardholders get access to tickets starting May 11 at 10 a.m. (Vegas time). Club Grazie members can start buying 24 hours later and the general public gets access on May 14. Prices are undisclosed … Always trying to stay one step ahead of New York City Mayor Bill De Blasio (D), Gov. Andrew Cuomo (D) announced that Empire State casinos can go to 50% capacity on May 15 … An anonymous New Mexico player only had to wager $5 to win a $10.5 million slot jackpot at South Point. Just hours before, a $40 bet triggered a $2 million payout at The Cosmopolitan of Las Vegas … Expect slot holds at O’Hare Airport and Midway Airport to be tight. Or, as Southwest Airlines CEO Gary Kelly put it, “I think Las Vegas has led the way with some really innovative techniques out there” … Add The Pass Casino to the Derek Stevens empire. No, he hasn’t bought it but he has opened a Circa-branded sports book there. Pass owner Joe DeSimone now plans to add a hotel to the downtown Henderson property … Florida Gov. Ron DeSantis (R) has inked a new gaming compact with the Seminole Tribe and sent it on to the Lege, which will consider it in a special session. Separate legislation would end harness racing at Isle Casino Pompano Park but permit its card games to continue.