“The twilight’s last reaming”?!?!? Christina Aguilera said it, I didn’t.
Of all the proposition bets being made on Sunday’s “Big Game” (the favored Vegas euphemism), my favorite is how long it will take Alicia Keys to crawl through the National Anthem. Admittedly, Jennifer Hudson‘s Wagnerian 2:10, at 2009’s Super Bowl, gives Keys a high bar to clear, although it would take a real speed demon to finish “The Star-Spangled Banner” in less than the U.S. Academy Choirs‘ sprinting 68 seconds in 2005 (not counting the reprise), while — at 95 seconds, last year’s Kelly Clarkson rendition represents the Golden Mean.
Wading through a blizzard of quarterly reports, J.P. Morgan‘s Joseph Greff wasn’t able to weigh in on the WMS Industries takeover by Scientific Games until today. “Cautious optimism” would describe his opinion, “cautious” being the operative word. After a sudden spike and 
steep plummet yesterday, Scientific stock has rallied a bit, while WMS continues to trundle happily along at just under $25/share. Greff”s take is that Scientific caught WMS during a downswing in terms of both earnings and ROI, and that the transaction is further complicated by multiple factors. These include “accelerating operating expenses related to unproven [online] product” and a “very modest” replacement cycle. Given Scientific’s premium price (159% of WMS’ previous close of trading) “the uncertainties associated with WMS’ newer products and initiative [and] an elevated operating expense structure related to its interactive initiatives,” Greff expects neither a bidding war nor a new round of consolidation in the manufacturing sector.
Bally Technologies, which sticks to its knitting, remains the darling of Wall Street at $49.25/share. Greff lauds it for improved financial performance (including a 32% profit increase), de-leveraging and strength in the gaming-operations sector. Bally hews to a conservative strategy, driven by server-based-gaming platforms, well-established operating systems, fanning out into tournament products, new boxes, etc. Unlike WMS and International Game Technology it’s not attempting to reinvent the mousetrap but improve the existing one. Deutsche Bank‘s Carlo Santarelli described yesterday’s quarterly earnings report “as expected with no stand out surprises, good or bad,” but cautioned against deceleration later in the year, when the effect of large-scale VLT sales in Canada wears off.
I wouldn’t say Wall Street’s reaction to Wynn Resorts‘ fourth-quarter report was ho-hum. Rather it was a case of the best surprise being no surprise. In Santarelli’s phrase, Wynn ‘split the fairway,’ with much-better-than-expected winter revenue in Las Vegas, up 12% despite low occupancy (79%), offsetting diminished margins in Macao (where long-abated Cotai Strip construction is finally underway, to the tune of $4 billion). Relatively weak performance in China means that former underachiever MGM Grand Paradise now enjoys larger Macao market share than Wynn except — a very important ‘except’ — in its share of table-game action. Corporate expenditures ($37 million-plus) were bloated by the ongoing legal battle with Kazuo Okada.
Interestingly, Steve Wynn is forecasting 15%-19% ROI on his Philadelphia and Boston projects — if approved — which would be an impressive feat, given the associated costs and the prospect of East Coast saturation, especially in Philly. In a pointed dig at prospective rivals such as Penn National Gaming and Caesars Entertainment, El Steve attributed his domestic strength to distinctive hotel products vs. others’ “slots in a box,” as he put it. Let’s face it, when you see a Hollywood Casino, you think “slots in a box,” don’t you?
While it may be a “national gambling behemoth,” Penn National currently finds itself undecided whether to bid against MGM Resorts International for a casino in Prince George’s County. It would certainly be difficult until Penn finishes cloning itself, thereby circumventing Maryland law by keeping its Perryville casino in one entity and Rosecroft Raceway in another. Ergo, it will undoubtedly sue MGM, thereby purchasing time to complete its REIT-ization. What Penn’s doing is a transparent sham — but it may not be an unconstitutional sham. In better news for the state, Rocky Gap Lodge & Golf Resort (beneficiary of a sweetheart 50% tax rate) is on pace to open in May, with 558 slots and 10 tables. The western-Maryland license has hung fire for so long that the clanging of those slots will be sweet music to lawmakers’ ears.
If you’re coming to Las Vegas, brace yourself for a taxi strike. This might be a good time to look into renting a car instead.
