Rhode Island Gov. Gina Raimondo (D) doubled down on her commitment to International Game Technology to run the state’s lottery by rebuffing an offer from Scientific Games, in tandem with Twin River Casinos. The Scientific proposal promised 1,100 jobs or $100 million if the job-creation number wasn’t met. It provided a useful distraction from Raimondo, whose sweetheart contract with IGT is being queried by the state Senate Finance Committee. Taking a potshot at IGT’s British leadership, Twin River characterized Scientific as “the only full-service lottery company headquartered in the United States.” “Today’s announcement that Scientific Games has joined Twin River is further proof that there is significant interest in bidding for Rhode Island’s lottery and gaming business, with virtually the entire global lottery industry now confirming that they will participate,” said Twin River Executive Vice President Marc Crisafulli.
However, Twin River quickly proved itself a flawed messenger. Yes, it has a covenant with Scientific. And with Intralot. And Camelot. Raimondo was quick to seize on this, saying, “It is almost laughable to me that it seems like every time Twin River has a hearing they pull another rabbit out of a hat. They are still not in this business. They still are not qualified to do this contract. And they just keep saying, ‘No, we will partner with this firm and that firm and this firm.’” Also, expansion-happy Twin River has become so indebted that it has broken its leverage covenant with the state and will have to pay a penalty. It also has promised to increase capex maintenance at its titular casino.
Blasted Raimondo, “I have serious concerns about the management at Twin River and their ability to run their own business, much less go after business that they are clearly unqualified to do and have no track record of doing. So my advice to Twin River is: Focus on your knitting and get your own house in order.” A spokeswoman for Twin River said the company had hoped to keep the disagreement on “the high road” but Raimondo “seems fixated on a special deal for IGT.” Maybe so but Twin River is making a poor case that it should be running the lottery.
* J.P. Morgan initiated coverage of Golden Entertainment with a highly favorable report. It noted that Golden stood to benefit from “a strong lineup of large events/trade show rotations in 2020” on the Las Vegas Strip, a strong Sin City economy (Golden derives 90% of its cash flow from locals) and that “The Strat’s performance likely improves as renovation disruption subsides by year-end 2019 and GDEN progresses to a 15% ROI there.” Analyst Daniel Politzer also liked that Golden was steering much of its free cash flow to debt reduction. 2020 promises to be “an inflection point,” thanks to ConAgg in the first quarter, the NFL draft in the second and the advent of the Las Vegas Raiders in the second half of the year.
* Boyd Gaming needs a shaman to send it some good weather, at least in the South. A pair of hurricanes impaired performance, with Boyd’s southern and Midwest casinos coming up 5% of analyst Joseph Greff‘s projections. By contrast, he used words like “outstanding” to describe Boyd’s Las Vegas performance. “Importantly, we are encouraged by the 3Q’s accelerating growth in the LV Locals segment (we think BYD is likely growing faster than the overall LV Locals market), a fairly benign competitive market with no incremental pressure from Palms’ new offerings on BYD’s Gold Coast results so far in the 4Q,” Greff wrote.
Like Golden, Boyd is focused on steadily reducing its leverage. Locals play continued to be a bastion of strength. “Management noted that 3Q19 … was the best 3Q since 2005, marked by record performance at The Orleans and Aliante, as well as growth in gaming and hotel revenues.” Downtown revenues were up 2.5%, with best-ever cash flow. Greff noted, “Results during the quarter were negatively impacted by disruption from construction of nearby downtown properties, which was partially offset by continued strength in Hawaii visitation and strong pedestrian traffic in the downtown area.”
Flooding and property closures marred the southern region, which is looking at a $3 million-$4 million storm impact. “Excluding the impact of weather, management noted same store results ‘slightly exceeded prior-year performance.'” Noting a “rational” promotional environment (read: few comps), management took a cautiously positing outlook, projecting $885 million-$910 million in cash flow for the year, although it thinks the upper end of that range may be “difficult” to achieve.
