New hope for Station; Raider Nation exiled

“We don’t read too much into 2Q trends given widespread casino closures, and lower foot traffic; however, we are concerned at the speed to recovery and risk in North American Gaming, which could weigh on sentiment moving forward,” wrote Credit Suisse analyst Ben Chaiken, apropos International Game Technology. Part of that risk is that the 40% of slot machines currently turned off could “churn” out of the installed base altogether. Think of it: Casinos with fewer slots. “It’s hard to identify the exact magnitude, but presumably operators will learn to do more with less given social distancing requirements. Win/unit will likely be higher under those circumstances but the net result should be lower revenue,” Chaiken continued. “Recall on the MGM 2Q call they mentioned slots as one potential area of cost savings.”

Chaiken liked IGT’s new partnership with FanDuel but didn’t think it would move the needle, as FanDuel is a mostly online concern. “If management can stabilize the business and follow through on $200m of cost savings, there is an interesting path for the story, but we think expectations around a rebound in slot demand may still be too high.” Lower lottery payouts could also dampen post-Coronavirus recovery. Chaiken’s prediction? “A leaner IGT.” There’s a lot of that going around.

Turning to Wynn Resorts, Chaiken was pleased that negative sentiment toward the stock was bottoming out and the company was burning through less cash, not that he professes to have ever been worried about WYNN’s liquidity. “At the end of the day, everything hinges on the rollout of [the Individual Visa Scheme] and easing of travel restrictions in China.” Lacking that, “gaming revenues are unlikely to meaningfully rebound … In Las Vegas, continued negative commentary, as well as the lack of clarity/timing for a rebound give us pause, but WYNN sentiment has never really revolved around Vegas despite its outsized exposure vs [Las Vegas Sands].” Chaiken concluded that Vegas demand faced “headwinds” but cash flow in 3Q20 should be positive and Macao is the real story anyway.

Greff was also sanguine, saying the conference call contained “no surprises.” He wrote, “We continue to believe that WYNN’s asset base in Macau positions it well for VIP and premium mass recovery … which, more recently has been ‘baby step travel easing’ every two weeks, which we think will provide for more robust visitation in time for the seasonally strong and important Golden Week period.” A Macanese recovery, he opined, would be “earlier and stronger” than a U.S. one. It needs it, as Wynn is burning through $60 million/month in Macao during a period of negligible revenue—$21 million last quarter. (Encore Boston Harbor, however, costs a disproportionate $25 million/month.)

Wynncore “reopened on June 4^th to strong pent-up demand from drive-in visitors … as the virus began to increase, reservations after July 4^th decreased 25%, and roughly 1 month into the 3Q, LV [cash flow] is ~$5m.” Lower baccarat volumes are killing table-game business (-31%), although slot handle is up 2%. Revenues are being driven by weekday traffic—and probably will be for some time. Slot coin-in at Encore is up 7%, and both it and Wynncore are benefit from deep cuts in operating costs. The main cloud on the Macanese horizon is that new Wynn Palace ($9 million) is underperforming theoretically outmoded Wynn Macau ($12 million). Room revenues at Wynncore averaged $226/night (down 32%), while revenue per available room took a shellacking, falling 67% to $99/night. Table game wagering was only $91 million but win/slot/day was an impressive $371.

Scary Coronavirus news from Sin City: A leaked memo from Sunrise Hospital raises the specter of rationed care. It details declines of certain types of transfers and postponement of various forms of surgery. Coronavirus cases “we will review on a case-by-case basis.” Also, “Hardships have been extended over longer stretches of time no one could have foreseen.” While 47% of ventilators remain available, but 85% of adult ICU beds are occupied and there was an influx of 160 new cases on Sunday alone. Whatever you do in Vegas, don’t get sick.

Jottings: Sassy @LasVegasLocally has nicknamed our governor “Spicy” Sisolak and nailed him on a political double standard whereby bars that don’t serve food are dens of Covid-19 iniquity but a “Magical Protection Spell” guards those that do … It’s official. Raider Nation will be invisible this NFL season. The Las Vegas Raiders will play their home games without fans. Said owner Mark Davis, “This decision is based on our commitment to protect the health of our fans and the entire community.” It won’t protect the health of MGM Resorts International, Tropicana Las Vegas and The Strat. The first two were counting on spillover business from Raider fans while Golden Entertainment assumed games would be played with fans when shaping its 2H20 business model. Whoops … It was a hot time in Downtown last night as a mattress fire broke out on the 10th floor of the north tower of the Four Queens. How many times do we have to tell you not to smoke in bed?