Upbeat at Churchill Downs

JP Morgan analysts met virtually with Churchill Downs brass, including CEO Bill Carstanjen. The news was good to great. First things first, the Kentucky Derby is expected to be run with spectators (CHDN execs are keeping an eye on what happens with the Indianapolis 500) and social distancing will probably mostly affect general-admission ticket holders. Although they represent two-thirds of attendance, their financial impact is minimal (10% of the gate). As for casinos, Churchill Downs has reopened seven of 10, although cash cow Rivers Casino Des Plaines is in the “TBA” category, along with casinos in Maine and Pennsylvania. “Derby City has been stronger than management expected, with many properties up y/y despite fewer machines/lower capacity and reduced freeplay/marketing.” Capex projects for the year are characterized as “on schedule,” mainly Oak Grove (September opening) and Turfway Park Annex (late in the year). Morgan’s Daniel Politzer wrote “we believe the broad reopening momentum in gaming should be constructive as CHDN considers resuming some of its paused capital projects.”