“Extreme” pessimism in Las Vegas; The D pisses for safety

Sands execs have gone top-hush on previously mooted acquisitions (up to and including Wynn Resorts) and are—responsibly—keeping a lid on dividends. Also, the potential recovery in Macao is held back by the ongoing suspension of the all-important Individual Visa Scheme. Accordingly, Greff all but eradicated his cash-flow projection for the rest of 2020, figuring the stock to be realistically priced right now around $53/share. He also warned that “our assumptions for Macau, Singapore, and Las Vegas Strip visitation travel and spend recovery remain too optimistic and additional waves of COVID-19 could thwart any revenue recovery potential; also the economic impact of COVID-19 could lower discretionary spending levels for longer and deeper than anticipated and impede our current projections.” Also, rising political tensions between the U.S. and China (and, need it be said, Sheldon Adelson‘s joined-at-the-hip relationship with Donald Trump) could imperil renewal of the all-important Macanese concession.

On the Las Vegas Strip, “current demand reflects predominantly drive-to customers, with little-to-no group/convention business.” Vegas revenues were a pathetic $98 million (-95%). Macao was even worse, plummeting 99% to $7.5 million and with no VIP revenue. Although spending $220 million a month, Sands still has $3 million in cash on hand, plus $4 billion in additional equity. So now is not the time to panic. Indeed, Sands continues to toil away at The Londoner ($850 million) and its Marina Bay Sands expansion ($3.3 billion).

“Given casino closures there was not a significant read from LVS’ 2Q numbers,” wrote Credit Suisse‘s Ben Chaiken, who sounds positively giddy compared to Greff. “We think Singapore could begin to accelerate both from an operational perspective and market sentiment, Macau seems like a question of when, not if, and 18+ months of liquidity in a zero revenue environment provides duration to wait for these catalysts to play out.” He liked Sands better than Wynn Resorts and MGM Resorts International, given its Singapore hole card. “We thought management’s tone on the call was more positive than expected, and could signal some early signs of growth,” Chaiken dissented. His upbeat expectations were partly predicated on low expectations and exposure in Sin City. Chaiken allowed that, “Management was particularly negative on Vegas, not expecting any meaningful convention/group business through the end of the year.” That Global Gaming Expo cancellation must really have them down. His price target is $58/share. Dividends would be moot in Chaiken’s view as he expects Sands to lose $1.99/share this year, pivoting to +$2/share next year and $3/share in 2022.

Deutsche Bank‘s Carlo Santarelli had the raw Sands data and it was pretty grim. Venelazzo (now with 100% less Emeril Lagasse) ran at 33.5% occupancy, with average daily rates of $162 (far below what Circa plans to charge) and revenue per available room of $54/day, down from $245. Hold was considerably loosened both at the tables (which saw $99 million wagered) and slots, where coin-in was $192 million. Once discounts and loyalty points were taken into account, the casino yielded only $14 million. Net revenue in Vegas was $36 million, while Macao was little better with $41 million. Singapore was the bright spot, contributing a disproportionate $23 million. And when that’s your bright spot …

First, the good news. Churchill Downs‘ New England flagship, Oxford Casino Hotel in Maine, gave a surprise opening on July 9 (and management may have been as surprised as anyone). The downside is that authorities are limiting the casino to 5% of capacity, the most stringent such requirement of which we are aware. That’s only 200 customers at a time for the 300 operational slots. No table games. No restaurants. No hotel rooms. An early patron told Oxford City Manager Butch Asselin, “it was very clean, very sanitary—and she won money.” He projected full-capacity reopening somewhere around September 1. You have to wear a mask and the casino floor is divided into quadrants, to keep 200 customers from bunching up on, say, 25% of the floor. Hollywood Casino Bangor opened the following day, although it is not clear under what constraints.

Speaking, as we did of Derek Stevens and Circa Resort & Casino, today—if all went according to plan—it installed the first of its marquees. Sixty-eight feet wide and anchored by a 34-foot-tall ‘C,’ the big sign is the handiwork of those masters of the art, YESCO, which spent a month building the four-ton icon, which had to be transported Downtown in pieces, so large is it. (Stevens never thinks small.) Three thousand LEDs will power the sign and, if you missed today’s ritual, a second marquee goes up next week. Not to be outdone, The D has garnered some ink by putting a mask on its naked statue of traditional Belgian troublemaker Manneken Pis. (The Stevens family is of Belgian descent.) “It’s no secret that I’m a fan of baring it all,” said remarks attributed to M. Pis. “But I know these masks are important to keep this city safe. I hope it encourages all of my friends in Las Vegas to wear one too so we can keep Las Vegas open and fun.” We’re glad to see the penile M. Pis getting into the appropriate pandemic spirit.