{"id":29528,"date":"2021-04-22T09:11:21","date_gmt":"2021-04-22T17:11:21","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=29528"},"modified":"2023-09-18T13:22:21","modified_gmt":"2023-09-18T21:22:21","slug":"betmgm-very-credible-recovery-at-sands-gradual","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/blog\/betmgm-very-credible-recovery-at-sands-gradual\/","title":{"rendered":"BetMGM “very credible”; Recovery at Sands “gradual”"},"content":{"rendered":"\n
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That’s how JP Morgan<\/strong> analyst Joseph Greff<\/strong> described an evidently persuasive virtual meeting with BetMGM<\/strong> covering the latter’s recent results and strategic objectives. “To us, this was a credible presentation (particularly with its customer acquisition and retention objectives and operating model as well as profitability ramp) and investors can\u2019t argue with or dispute the [joint venture’s] recent operating momentum and share gains,” Greff declared. He was impressed with BetMGM’s nationwide market share of 23% and its potential to edge out either DraftKings<\/strong> or FanDuel<\/strong> for the second spot in the sports-betting universe, to say nothing of Internet gambling. “BetMGM now expects the total addressable market in the U.S. and Canada<\/strong> to be approximately $32b (long-term, timeline not specified but our guess it\u2019s 2030 +\/-),” Greff wrote, adding that net revenues for the company were growing exponentially and could reach $1 billion next year. BetMGM has gone live in 12 U.S. jurisdictions, expected to grow to 20 by April 2022. That’s 40% of the American populace. (California<\/strong> remains out of reach until after the 2022 elections at the earliest.)<\/p>\n\n\n\n\n\n\n\n

Net revenues in the first quarter were led by i-gaming ($104 million), followed distantly by sports betting ($58 million). Michigan<\/strong> was the gold mine, generating $79.5 million combined, with New Jersey<\/strong> engendering $38 million. Live table games are a major Internet contributor, representing 15% of the Garden State tally. On the downside, “Management did not provide details on state by state basis but noted it doesn\u2019t include NY state with a ‘flexible framework, that would allow MGM to be considered both a platform provider and an operator.'” Like casinos, Priority A is to retain high-value players. These tend to be punters who registered at a brick-and-mortar MGM casino and who wager 50% larger than the average bettor. Given its large, associated hotel portfolio and the scope of the Mlife<\/strong> database, BetMGM would appear to be in the catbird seat.<\/p>\n\n\n\n

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Not to be outdone, Las Vegas Sands<\/strong> reported 1Q21 numbers and its $244 million in cash flow beat Wall Street<\/strong>‘s consensus estimate of $233 million but was right in line with where Credit Suisse<\/strong> analyst Ben Chaiken<\/strong> expected it to be. He focused, like the company itself, on the future of Macao<\/strong> and what Sands might do with its Venelazzo<\/strong> sale proceeds (the company being soooo<\/em> over Las Vegas<\/strong>). Chaiken thought it “tough to read” where Sands might spend its newfound $6.25 billion but thought Macao the likeliest choice, along with establishing a digital presence, throwing another spadeful of earth onto Sheldon Adelson<\/strong>‘s grave. New York State<\/strong>, so alluring so recently, is now “uncertain.” The same might be said of Texas<\/strong>, of which Chaiken made no mention. As for Macao, Chaiken thought Sands China<\/strong> the “best-positioned” operator in the region, especially with its mass-market focus, even if pent-up demand among customers might not fully manifest until 2023. Sands China generated $3.2 billion in cash flow in 2019 and only $200 million of that came from (currently scarce) VIP players. “Additionally, after 2 weeks of zero COVID cases, we think HK and Macau could open the boarder [sic<\/em>] which should be a further tailwind to trends.”<\/p>\n\n\n\n

Singapore<\/strong> faces hurdles of its own, mainly limitations on air traffic until vaccines are more widely disseminated. Chaiken continued to like Marina Bay Sands<\/strong>, even if its cash flow will be only a fraction of 2019 levels. Greff also projected a “gradual” Macao\/Singapore recovery, shaving his price target down to $66\/share (from $72). He was unsurprised that Macao was only modestly up from 4Q20 and that Singapore was flat. “However, we couldn\u2019t help but note a more somber tone on the rate of recovery in both Macau and Singapore (given limited visibility on travel restrictions lifting\/easing).” He deemed mergers or acquisitions “unlikely” and predicted that some of the Venelazzo money would be dispersed into dividends. As for Macao’s move toward digital currency, Sands leadership “believes it should not be a concern, but rather a potential source for additional player liquidity.” Regarding internal Chinese policy, “travel recovery is probably hinged on the rate of vaccinations in China<\/strong> and ASEAN regions, but we are sick of trying to game theory the government here,” Greff wrote with unaccustomed asperity. When it came to its Las Vegas Strip<\/strong> orphans, LVS didn’t even bother to report first-quarter numbers. Thanks for playing, Las Vegans, and don’t let the doorknob hit you on the way out.<\/p>\n\n\n\n