Macao fears overdone?; Dispatches from Atlantic City

After a long bout with the flu, we’re back with our usual persiflage. One of the stocks that was on the sickbed last week was Las Vegas Sands, bedridden from proposed new restrictions on Macao casinos. Deutsche Bank analyst Carlo Santarelli put pen to paper to assure readers that the worst is behind us. His analysis “provides us with confidence that downside risk from current levels should be fairly limited, though we acknowledge, valuation in the current environment has seemingly been a function of the latest stock price, plus or minus the interpretation of the next headline, and as such, we don’t deny that the near term could be choppy.” Santarelli outlined several caveats: “we aren’t pretending to know or display confidence around our view of the potential outcomes of the Gaming Law process in Macau … we recognize the situation in Macau is uncertain, though we believe the market has taken a fairly draconian view on the potential outcomes [and] we recognize incremental investment into the Macau centric names at this time of the calendar year and with this level of uncertainty is challenging.” Still, “we believe, the medium to longer-term risk-reward is skewed favorably in LVS at current levels.”

The weakness in Macao-centric stocks, Santarelli believes, “is largely predicated on the slow to recover Macau gaming market, given the virus containment policies, and the lingering concerns around the Gaming Law and concession process.” Against this he set the strong U.S. gaming recovery and “the in vogue revenue multiple, pie in the sky, names.” He opined that both Chinese government policy and stock fundamentals would firm up by year’s end would serve as positive catalysts for companies like Sands (which couldn’t have chosen a worse moment to put almost all its chips on Macao). He summarized, “To this end, and even in a limited identifiable immediate-term positive catalyst scenario, we believe the sell-off in LVS is overdone, as we see downside as limited. As such, we reaffirm our Buy rating.” Indeed, this seems a good time to buy, as LVS and its ilk couldn’t get much lower, barring a catastrophic Chinese decree.

Speaking of catastrophe, those wacky Fertitta Brothers have stepped in it again. According to the Nevada Gaming Control Board, on 348 occasions Station’s Stadium Live mobile-wagering app accepted bets on games whose outcome was already final. To underline the gravity of the accusation, a representative of the Nevada attorney general’s office co-signed the complaint, which covers alleged infractions dating back to 2018. No motive for the miscreance has been offered as yet and Station isn’t talking. At the very least, there’s been great laxity in the sports book and a housecleaning would appear to be in order. In a response to regulators, Station attributed some of the misplaced bets on mechanical failure but the NGCB was not placated, writing that the company was “well aware” of the problem and Station’s “failure to ensure these processes were in place … reflects or tends to reflect poorly on the reputation of gaming in Nevada.”

In his usual slippery fashion, New Jersey Gov. Phil Murphy (D) has more or less come out against smoking in Atlantic City casinos—putting the onus on the Lege. If the latter passes such a bill—highly unlikely—”You should assume that I will sign it,” said Murphy. Notice that he’s not prepared to do any heavy lifting on nonsmokers’ behalf. If presented with a fait accompli, he’ll merely go with the flow. Smoke Free AC founder Bob Zlotnick was under no illusions, saying, “We’re hopeful, it’s really good news that Gov. Murphy said that, but if it doesn’t hit his desk he has nothing to sign.” Added Cynthia Hallett, prexy of Americans for Nonsmokers Rights, “we know that Senate President Sweeney, in particular, stands in the way. The governor must go further and publicly call for Sen. Sweeney and Speaker Coughlin to send a bill to his desk in the lame duck session.” Casinos, meanwhile, continue to reiterate Chicken Little rhetoric about the effects of a smoking ban and we expect that to carry the day. Meanwhile, the group below didn’t have the ghoulish sensibility to book their Hard Rock Atlantic City convention for Halloween …

However, they spiffed the place up and filled it to the seams, looking mighty snappy in their suits and dresses. “At the Lobby Bar, the bartenders could hardly keep up with their demand,” says our source. Mayor Marty Small (D), meanwhile, has announced that $3,500-per-person compensation of City Hall employees for pandemic risks will be prorated according to number of hours worked, prompting our Atlantic City correspondent to remark acidly, “good thing the State of N.J. didn’t ask for proof of actual work done, most would receive little or nothing.” (Not a dollar, by the way, for medical workers, first responders or police. “When the Minutes of the town meeting were sent to the State, they rejected the Minutes … As someone unkindly mentioned in the A.C. press, the A.C. city workers were working remotely, not exposed to anything in the workplace.” Also $500-per-property owner rebates for Covid-19 exposure are “still under negotiation,” which our source takes to mean Trenton said ‘no.’

The city will get money, half a million worth, to conduct a study of what to do with the Trump Plaza site. “I’m sure that Uncle Carl will not be happy since he owns that site and might not allow any use, and has more $ than A.C. and the state of N.J. combined to fight back.” Icahn isn’t a builder so our best guess is he’s looking for a cushy flip of the old Trump Dump. Perhaps he should invest in the windmill farms being built off the Atlantic City coast. A jumping-off facility is being built in the burg’s Inlet section, for staging workers and materials for the farms. Finally, Caesars Entertainment is getting serious about improving Caesars Atlantic City, opening a Nobu restaurant there (in addition to one at Harrah’s New Orleans). Said CEO Tom Reeg, “Nobu’s sophisticated elegance is the perfect complement to the multimillion-dollar renovation projects we are developing in all three cities, all of which are fast becoming the nation’s top modern sports, gaming and entertainment destinations.”

Sports betting revenues in Michigan were relatively meager last month, amounting to $16 million (out of $192 million in handle) but i-gaming hit a record $97 million. Thanks to heavy promotional allowances, DraftKings gained ground on FanDuel, $4.4 million to $4.8 million. BetMGM was close behind at $4 million, then … well, nobody really, as only PointsBet came even close to cracking the $1 million mark. As for Internet gambling, BetMGM easily led all comers with $40 million, followed distantly by FanDuel’s $14 million and DraftKings’ $12 million, then BetRivers‘ $7 million and Golden Nugget Online‘s $5 million. Also on the radar were FoxBet with $3 million and Barstool Sports with $2.5 million. DraftKings, meanwhile, is trying to seize half of BetMGM through a complex, $22 billion takeover attempt of Entain. That’s mighty big talk for a company that’s never turned a profit.

Jottings: The San Manuel Band of Mission Indians has tapped veteran MGM Resorts International executive Cynthia Kiser Murphey to be general manager of Palms Casino Resort once the property changes hands. Late of New York-New York, Murphey didn’t tip her hand as to how the Palms will be repositioned … Caesars Entertainment has unveiled the design of its $500 million Danville, Virginia, casino and it looks pretty darn sleek. If execution lives up to promise, the money will be right out there for all to see. It will cost 25% more than initially planned but will be worth it … Bally’s Corp. is putting $100 million of capex investment into Twin River Lincoln, the company’s original spore. There will be a new spa plus 4K more square feet of gaming floor. Bally’s also plans to further segregate smoking and non-smoking players … LSU Athletics is only too eager to get into bed with corporate sports betting. It has inked a pact with Caesars whereby the latter becomes the athletics department’s exclusive gaming and sportsbook partner (which is a little too close even for our comfort). Caesars gets a branded lounge at Tiger Stadium and copious signage at several collegiate sports venues. Broadcasts and digital transmission of Louisiana State University games will be peppered with Caesars sponsorships. By way of giving back, Caesars will underwrite scholarships for majors in sports administration, commerce and leadership.

Quote of the Day: “They’re getting unemployment or stimulus checks and they want to double or triple their money. They say that all the time: ‘I just got a check and I’m going to make it double.’”—FanDuel Meadowlands supervisor Jerry Arnold on football-betting fever.