Boyd weathers challenges; MGM swoons

An alternate headline for Boyd Gaming‘s 1Q18 results might be “better than expected.” Although the company had modeled a $12 million-$15 million cash flow hit at Blue Chip from new, nearby Four Winds Casino, the company’s Midwest revenues came in flat, which surpassed Wall Street‘s expectations. JP Morgan analyst Joseph Greff even called Boyd’s Blue Chip projection “too harsh.” The company came in lower than projected in the Las Vegas locals and Downtown markets, the latter impacted not by visitation, which was described as “strong” but higher jet-fuel prices. It’s not cheap chartering those planes in from Hawaii. If regulatory approvals go according to plan, Boyd opens up multiple new cash spigots in the last half of the year, mapping $21 million free cash flow from Valley Forge Resort Casino and $56 million from the Ameristar St. Charles/Ameristar Kansas City/Belterra/Belterra Park quartet.

Boyd actually expects Gold Coast to benefit from Station Casinos‘ capex improvements at the Palms. It also reported that cash flow “growth trajectory remains sound and the broader regional consumer remains healthy (visitation and spend up across the board).” Other than regional competition, “choppy Louisiana trends” were the only cloud on Santarelli’s horizon.

* MGM Resorts International‘s earnings report gave Wall Street a heart attack, sending the stock down [Correction: 9%]. Greff wrote “We want to believe that MGM will use its improving balance sheet/free cash flow profile in shareholder enhancing ways and not lever up to buy any sizable, in flight casino development [read: buy Wynn Boston Harbor] … and forgo open market buybacks/increasing dividends.” He even got a bit snarky, saying MGM management “cites three (no, four…no, five) issues” to explain the results. As for Mandalay Bay‘s Typhoid Mary status, he calls it “no fault of management, it’s a tough situation, but they should have provided a cushion one quarter ago.” He also faults MGM for being too aggressive in projecting Park MGM results. At least the Canelo Alvarez fight might be rescheduled this year.

On the brighter, Chinese side of the ledger, VIP play at MGM Grand Macau came in at $325 million, not the expected $235 million (up 23%). And mass-market tables at MGM Cotai were pulling over $8,000 a day, “among the higher levels for Macau’s new casinos.” MGM should also free up some cash when it consummates the announced sale of Mandarin Oriental and “adjacent retail parcels,” for $214 million. Greff concluded that “MGM’s valuation remains cheap” especially given the performance of its “two jewels,” Bellagio and MGM Grand. Long-term debt is a dizzying $13.4 billion. Does CEO Jim Murren really want to bet the farm on Japan or a buyout of Wynn Boston Harbor?

Santarelli believed that the revision of MGM’s forward-looking numbers “clearly came as a surprise” to the market. Also, while there was upward movement in room revenues, it came entirely from increases in that abomination, resort fees.

* Parx Casino has an appetite for another satellite casino in Pennsylvania. Unfortunately, its chosen location — Carlisle — voted itself a no-casino town. What to do? “The debate has the potential to be the most controversial issue to come before the council since its 2016 passage of an ordinance extending anti-discrimination protections to people of all sexual orientation,” reports Penn Live. Parx seems to have its sights set on the soon-to-depart Bon-Ton store, which anchors a shopping mall in Carlisle, although it has at least two fallback locations. Parx also has the support of Mayor Kirk R. Wilson, who said, “It’s a gift from above and I think it can be done responsibly.” He’s look at the town’s emergency-service budget and seeing a quick fix in casino host-community fees. There are two hard-line votes against Parx on the city council, but three swing votes are in play, with council members saying they want to hear more about what Parx brings to the table.