After having taken a beating in Illinois from slot routes, Boyd Gaming is pivoting and getting into the route game itself. It is acquiring Lattner Entertainment, giving it 1,000 slots in 220 locations in the Land of Lincoln. Since there’s nothing to be built or remodeled, the deal will 
immediately contribute to Boyd’s free cash flow, as well as taking some pressure off Par-A-Dice casino. “Gaming investors have a case study for this BYD deal in PENN’s 2015 acquisition of Prairie State Gaming and we believe that experience has been favorable from an ROI perspective,” wrote Deutsche Bank analyst Carlo Santarelli, while noting that Penn National Gaming bought Prairie State for a low cash-flow multiple (4.5X) while Boyd is paying a premium 8X.
Santarelli projects the Lattner deal to generate $40 million-$50 million/year for Boyd, compared to Penn/Prairie State’s $63 million, which boiled down to $137/slot/day spread across 1,100 machines in 270 sites. Added JP Morgan analyst Joseph Greff, “Net, we view this as a nice, small tuck-in acquisition for BYD worth ~$0.65/share … and also allows the company to potentially test the waters in sports betting.” The Prairie State and Lattner deals are but a drop in the bucket in Illinois, where slot routes have grown to a monster 29,000 machines in 6,500 venues. Wow.
* Station Casinos beat Wall Street‘s expectations for 1Q18, which Greff wrote “reflect its strong positioning in a healthy and growing [Las Vegas] locals market, same-store market share gains there, and 
lessening impact from construction disruption at Palace [Station] and Palms.” Greff added, “Management highlighted continued strength in the Las Vegas economy (population growth, job and wage growth, as well as a steady city-wide pipeline of capital projects) as well as growing benefits from its recently revamped slot system,” along with better-than-expected results from tribal-gaming contracts.
The redo of $191 million Palace Station is coming in on budget and ahead of schedule, expected to finish in 3Q10 not (as previously thought) year’s end. That’s pretty impressive when you’re talking about a luxury movie theater, a third restaurant concept, a resort style pool complex, a casino bar, new race and sports bar, renovated poker 
room and a fully renovated casino floor. The upheaval has also impacted business less than anticipated. As for the $620 million Palms revamp, the word is “on schedule and on budget.” The primary stage of the three-phase overhaul debuts later this month and will include additional slots, tables and a high limit room. The new buffet and Lucky Penny diner are already on line. We’re still over a year and half away from the conclusion of Phase III, which will strive to give the Palms a flavor appealing to Asian players.
“Management noted the IGT system, which is not yet fully deployed, … was an integral driver of outperformance in the period as key slot 
metrics continue to rise in excess of market growth post the implementation,” Santarelli added. His views were largely in line with Greff’s: “We felt the 1Q18 upside to Consensus, the well-articulated growth trajectory on the call, firm construction costs and the accelerated timeline for completion at Palace Station, and less construction disruption at Palace Station, were some of the more meaningful positives in the period.” The Fertitta Brothers should be able to dine out on those endorsements for a while and rightly so.
