David McKee

Boyd Gaming CEO Keith Smith and CFO Josh Hirsberg lunched with Deutsche Bank‘s Carlo Santarelli, who found their mood bright and shiny. “Management remains confident that if current [Las Vegas] locals and regional gaming revenue trends hold firm, it can continue to improve margins,” Santarelli wrote. He also found that management wasn’t standing pat on acquisitions, the question mainly being of finding one that justifies the leverage involved. Also, a REIT conversion is still under discussion but with no urgency attached.

Management admitted that Vegas locals business was 50% off of its all-time peak (and it does remain volatile), moving Santarelli to observe that this was “the most detached” aspect of Boyd’s larger growth story. He kept his price target at $24/share (Boyd currently trades at $20.40. At least Santarelli kept a more open mind than most of Wall Street, which usually greets Boyd with a shrug.

* Given that Studio City Macau opened and didn’t budge the Macao market one bit, Santarelli is right to say “Why not” when Wynn Resorts announced that it was pushing Wynn Palace back to June 2016, off Steve Wynn‘s oft-iterated March 25, 2016, opening date. “Our conversation with management gives us some comfort that there is not much more behind the release than what is stated,” wrote Santarelli who added that there were no governmental or labor issues behind the delay, nor was there any change in the budget.

“Broadly, while we are surprised by the announcement, given our negative view of the impacts of new supply into the current market climate, we don’t think the 3 month delay is entirely meaningful from a fundamental perspective,” he added. “We continue to believe Wynn Palace will be the next property to open in the market.”