Betting on Adelson

Analysts at J.P. Morgan are downright bullish on Las Vegas Sands, raising their stock price target by over 25% (to $29/share). Their ebullience is motivated in large part by expectations for Marina Bay Sands, which they estimate will garner 55% of the Singapore casino market, along with cash flow of $904 million (up from $751 million) and $1.9 billion in revenue by 2012. They also predict the $6 billion megaresort will generate “solid out of the box returns and quickly de-lever.”

In the Macao market, “the opportunity to monetize condos at the Four Seasons … is real” and undervalued by the Street, JPM analysts contend. As for Sands’ erstwhile flagship properties on the Strip, investor expectations are so low that Venelazzo is basically a non-factor in any calculation.

Turning to MGM Mirage, JPM espies upward trends both in occupancy rates and — not surprisingly — room rates on the Strip through 2012, despite weak convention business and lower spend-per-customer at Bellagio. (Even so, room rates strongly suggest that visitors would rather stay at Steve Wynn‘s masterpiece and skimp elsewhere than gravitate to Aria.) Starting around July “higher-quality, higher-rate, higher-margin” customers are expected to start elbowing out bargain-conscious ones. MGM gets a comparable upgrade to Sands, to $17 from $14.

Did someone say “Steve Wynn”? His Wynn Resorts remains the cream of casino stocks, its target price raised from $72/share to $88 by JPM, despite weaker-than-expected hold at Wynn Macau. The opening of Encore Macau is seen as a positive catalyst, with projected cash flow of $681 million for the two Chinese properties dwarfing Wynncore‘s $290 million.

Last and comparatively least is Midwest-centric Ameristar Casinos, downgraded to “neutral” following a more-than-average (i.e., 20%) decline in its stock price. However, JPM discounts the recent pummeling Ameristar took in Indiana and likes the company’s reduction in property-related expenditures.

River City wins, everybody else loses. The introduction of a new Missouri megaresort, in the form of Pinnacle Entertainment‘s River City pushed Show-Me State gambling revenues up 5.3%. So massive was the cannibalization, though, that the rest of the state’s casinos were, on average -5.3% for March. While generating slightly less revenue than expected, River City accounted for 10% of Missouri revenues. Both Ameristar St. Charles and Lumiere Place felt the pinch, each off 8%. Ameristar also hit a 6% dip in Kansas City, closing out a fairly rough month for the operator.

Kansas still f-ed up. Nervous casino managers in Kansas City could take solace in the fact that the neighboring Sunflower State can barely open a casino to save its life. The latest operators to flee the state are Lyle Berman of Lakes Entertainment and his partners at Foxwoods. (Their not-coming-to-a-market-near-you project is seen at left.) Berman’s financing looked quite iffy from the get-so, so color this a complete non-surprise. It does, however, leave the state’s Lottery Board with a pair of casino licenses — the other slated for Cherokee County — that it can’t give away. While I never thought I’d live to see the day of “What if they offered a casino license and no one came?”, the industry is so overextended that such an unimaginable situation has arrived.