MGM gets new admirer; Okada busted again

JP Morgan has initiated analyst-focus coverage of MGM Resorts International “as we see an increasingly favorable setup for 2019” that includes “relatively low expectations in Las Vegas.” Morgan analyst Joseph Greff applauded the upcoming pogrom of the MGM workforce, as well as the upcoming racino at Empire City in Yonkers. He added that room revenue and gross gaming revenue on the Las Vegas Strip were tracking comfortably ahead of MGM’s projections. Greff predicted a better entertainment calendar for 2019 (spelled “Lady Gaga“) and continued recovery at Mandalay Bay. Speaking of entertainment, everybody seems to be pretty chill about the postponement of Britney Spears‘ Domination show at Park MGM. (Wooing Spears away from Caesars Entertainment was quite a coup for the lion.) The consensus appears to be that the show will go on sooner or later and, if not, presenter Live Nation has plenty of acts that can plugged into the resultant gaps.

By contrast, Greff lowered estimates for Penn National Gaming, due to a number of headwinds. These include the closure of a General Motors plant that will adversely affect star performer Hollywood Casino Mahoning Valley in Ohio, the impact on Plainridge Park of new competition both from Rhode Island and the Boston area, and the continuing fallout from a smoking ban in Baton Rouge. On the plus side, Greff name-checked the acquisition of Greektown in Detroit and the management contract at Margaritaville in Shreveport. He described the stock’s valuation as “attractive.”

Greff was downright bullish on Wynn Resorts, raising his projections of its Macao cash flow to $357 million for 4Q18, well above Wall Street‘s consensus of $332 million. “Similarly, we feel our prior 2019 Macau EBITDA forecast was likely too conservative,” Greff wrote. “As such, we are bumping our estimate by 8% to $1.47b or $4.0m of EBITDA per day.” He didn’t speculate on the effect upcoming Massachusetts Gaming Commission action will have on Wynn’s bottom line.

* It looks like Mohegan Sun‘s and Foxwoods Resort Casino‘s fears of MGM Springfield were almost for naught. Both posted slight revenue declines for 2018, but not so much as to be of grave concern. Both grossed over $1 billion, including such revenue streams as the WNBA‘s Connecticut Sun and Mohegan Sun Golf Club, as well as “a weaker overall entertainment calendar featuring fewer headliner shows.” At Foxwoods, a dip in table revenues was offset by improved slot play. Mohegan Sun reversed the equation. Both casinos might want to worry a bit less about MGM and a bit more about their debt loads — $1.9 billion apiece.

* Things go from bad to worse for Kazuo Okada. A Philippines court has issued an arrest warrant for the mogul, accused of embezzling $3 million from Tiger Resort. At least Okada won’t have any trouble making bail: $6,627. The indictment charges Okada of obtaining the money through bogus consultancy fees and salary. If arrested, it won’t be the first time Okada has been in handcuffs this year, having been arrested in Hong Kong last August. Railed Okada, “These cases are only intended to destroy my reputation in the business community and discredit all the hard work I have put into the establishment, rise and success of Okada Manila, which is now operated by my accusers.” More specifically, he described the disputed payments as “salaries and fees for his efforts, contribution and services in establishing Okada Manila pursuant to contracts entered into by him and [Takahiro] Usui, who was authorized by the board of directors of Tiger Resort, Leisure and Entertainment to enter in such contracts.” For Okada, it’s quite a turnabout from the days when the Philippine court system banned Steve Wynn from the archipelago in retaliation for having badmouthed the Japanese billionaire.