3 June: LVS on a build back better tip +More
Las Vegas Sands presentation, Accel Entertainment investor day, Bally Corporation analyst update, Nevada GGR April, Macau GGR May
Good morning. While the first-quarter results season has drawn to a close, it doesn’t mean there isn’t a lot going on. Today we bring you commentary from yesterday’s presentations from Las Vegas Sands and Accel Entertainment plus there is the reaction to the latest data from Nevada and Macau and an analyst update on Bally Corporation. For your calendars, next week Earnings+More will be reporting on iGamingNext’s Bright Future Conference (8th and 9th) and SBC’s Digital North America event (9th and 10th).
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Las Vegas Sands presentation
Maybe it’s because I’m a Londoner: Speaking with Bernstein’s Vitaly Umanski as part of the bank’s Strategic Decisions conference, LVS CEO Robert Goldsten and president Patrick Dumont expressed disappointment at the slow pace of the Covid recovery in Macau. But they were both optimistic about the medium and longer-term picture. While revenues in May are still some way below 2019 levels (see below the May GGR numbers), a sign of continued issues around travel to Macau by Chinese visitors, Goldstein said when they return things business will bounce back very quickly, “just like Las Vegas” with help from the new Londoner, the first phase of which opened in February. “This Londoner product could be awfully good,” said Goldstein. “I don’t think people are giving us credit for what we have invested in our portfolio over there when the gates open to tourists.” Goldstein added that Macau remained “absolutely capacity constrained”. “Just having expansions from Galaxy and us, it is not enough for what we think will come once the pandemic is over.”
Wish you were here: “Macau is still the best land-based market in the world,” Goldstein said and when asked about the concession process he repeated LVS’s faith that its relationship with the Chinese government would hold it in good stead.
“I rely on our $15bn investment, our leadership in rooms, in restaurants, in conventions. We did everything when it wasn't popular. And I don't think the government will forget that.”
Brass in pocket: Goldstein and Dumont repeated the message from the Q1s that it has yet to make any decision in the deployment of the Las Vegas sale proceeds. More investment in Macau and, particularly, Singapore seems on the cards but also in the US where LVS retains an interest in prospective new land-based gaming opportunities in New York and Texas. “We like building up from the ground,” said Dumont. Goldstein also repeated the Q1 message that exiting Las Vegas also didn’t preclude the company from looking at sports-betting and online and suggested that the aforementioned land-based entries could be part of its entry into that arena.
“New York and Texas are both hugely viable,” said Goldstein. “I know it’s not fashionable being involved in the land-based business (but) these markets will eventually be digital markets. The game is just beginning digitally and land-based will pave the way for digital.”
Accel investor day
Pedal to the metal: The key takeaway from Accel Entertainment’s investor presentation was the company’s planned expansion away from its core Illinois market and into Montana and Nevada when it closes its acquisition of Century Gaming. This will be followed by rollouts in Pennsylvania and others with pending legislation such as West Virginia or Indiana. The group reported strong Q1 growth despite a partial lockdown in Illinois and CEO Andy Rubenstein said it had recorded its strongest performance ever for a month of March this year. He added that in May the group generated $65m in revenues, despite the warm weather.
Loyalty build-up: Accel is not allowed to track players in Illinois with the same granularity as the casino industry and carries out most of its loyalty and reward activities by getting players to sign up to sweepstake contests. It then follows up with direct mail marketing. Chief Commercial Officer Michael Marino said the number of sign-ups to the group’s rewards schemes had risen, possibly with “new players trying out the product for the first time”. As regular land-based players tried online gambling during lockdown, they also tried Accel’s products in bars and restaurants, he said. Analysts at Macquarie noted that “casino operators have talked about up to a 10% uplift in revenue from plugging in a rewards program to a new regional gaming market.”
Some misunderstanding: Marino added that there is a misconception, including from himself after spending eight years at Caesars, about VGTs. “The machines are high quality and the user experience is very good,” he said.
“I didn’t use to think much of the machines when I was at Caesars, thinking they were in some backroom of a restaurant, but that’s not true at all.”
He added the group was also missing a good chunk of its player base, which tends to be older and more cautious about venturing out in public. “We believe we’ll get more of them back soon and we’ll keep the newer players who signed up more recently.”
Boxfresh: Rubenstein added that Accel brought a fresh look at what are mainly legacy markets operating VGTs. One of the key features of VGTs is that customers use them every day.
“We’re the convenience stop for gaming. For one or two hours they choose to play with us and have that primary relationship. We want to expand and deepen that.”
Analysts at Macquarie said that the trifecta of stimulus checks, tax returns and increased personal savings rates had pushed Illinois terminal income to record levels in the past three months. However, the company remains a play on Illinois, Montana and Nevada while Pennsylvania and Georgia are still “small.” The Century acquisition (where win-per-day is trading 40% higher since the deal was announced in March) in particular has been boosted by the positive post-pandemic backdrop. Union Gaming were more upbeat, suggesting the transferability of a “proven durability” model from Illinois into new markets was under-appreciated.
Bally Corporation analyst update
Mile high club: Analysts at Union Gaming said yesterday that the completion of the Bet.Works acquisition at the start of this week and the launch of Bally Bet in Colorado in the final days of May were a “significant milestone” for the company. Moreover, they believe the market is yet to catch up with developments, suggesting the circa $500m value being ascribed to the interactive arm undervalues that business substantially. “We contend Bally Interactive is worth upwards of $3bn based on a 10x multiple of our FY22/23 revenue estimate of $300m, which assumes a 10% share in each of the markets in which it has access,” they added. “This revenue estimate could prove conservative if Bally garners more than 10% share in some markets (or) Bally gains access to more jurisdictions.” Recall, Bally will be live in three more states before the year-end.
Providential timing: Lawmakers in Rhode Island have passed legislation that will give Bally better slot economics and more control over the slot floor at its property. In essence, as long as Bally buys 40% of its VLTs for the property from in-state (i.e. from fellow Rhode Island corporate resident IGT), it will retain the 7% VLT capex tax, which will benefit annual cash flow by around $15m. The bill also relaxes Bally’s covenant restriction to 5.5x from 4.75x, which gives it extra leverage on the funding of the Gamesys acquisition. It means Bally has the ability to “take advantage of the white-hot credit markets.” At the time of the Q1s, Bally said it was mulling over the offer from a strategic investor to part fund the deal.
Nevada GGR April
The top line
April GGR for the Strip of $483.4m was down 4% MoM but flat on Apr19. Locals declined 5% MoM to $244.8m but was still up 18% vs Apr19.
Strip slots handle was up 15.7% on Apr19 but table handle was down 17.9% on the two-year comparison. Slot revenue of $327m was up 18.9% on Apr19, while table revenue of $128.1m was down 8.6% on Apr19. Baccarat revenue was down 57.5%.
Locals slots was up 15.4% on the two-year comp at $207.6m; table revenue was up 35.6% to $37.3m. Downtown Vegas GGR was up 23.4% on Apr19 to $76.2m while Reno GGR was up 26.3% to $61.9m.
Leisure society: The mass market/slot numbers highlight the strength in the leisure custom on the Strip, say the analysts. “With full capacity having returned May 1, we think the summer months will see significant pent-up demand before the full-scale return of conventions,” said the team at Jefferies. Macquarie concurred and added that VIP GGR in the year-to-date remains weak (at -35%) and that is not expected to rebound until international travel resumes. “With the first major citywide exhibition (World of Concrete; June 8-10), Resorts World LV opening (June 24) and entertainment (beginning in July/Aug), we remain bullish on trends and catalysts.”
Drive-in Saturday: The Macquarie team also last week issued their latest survey of booking trends which also pointed to increased momentum. Searches increased 23% MoM in April (after a 61% surge in March) and they believe this to be only 2% lower than April 2019. Macquarie pointed out that the leisure customer has been the primary source of demand, highlighted by the 10% rise in mass play in April vs Apr19. Meanwhile, drive-in traffic is up 8% on the two-year comparison, an all-time record and assuming typical seasonality, Q221 GGR should be up over 30% QoQ. Macquarie reiterated their view that Las Vegas would rebound at a faster pace than after the Great Financial Crisis partly due to the lack of much by way of new supply. Only Genting’s Resorts World June opening is slated for this year.
Macau GGR in May
The top line
Revenue for the month was up 24.3% sequentially to MOP10.4bn ($1.3bn) and up nearly 500% on Covid-hit May 2020 though it is still some way behind the May 2019 figure of MOP26bn.
Cautious optimism: This was the first time since the onset of the Covid pandemic that revenues in Macau have come in over MOP10bn, helped by the occurrence of a Golden Week holiday in the month. Analysts at Jefferies pointed out that the next big holiday comes in October. The GGR news followed on from the news last week of booming occupancy rates for April in Macau. The positive performance on both gaming and hotel occupancy encouraged Deutsche Bank analysts to raise GGR estimates for the second quarter to $3.66bn from $3.04bn. Notably, however, at the same time they trimmed estimates for the year.
Jefferies: Macau monthly GGR - post-pandemic high
Outbreak worries: Tempering the mood is the news of a Covid outbreak in Guangdong region which has caused the Chinese authorities to cancel all flights out of Guangzhou. The Macau government has imposed restrictions on people from any Chinese mainland region with a COVID-19 outbreak to undergo a 14-day period of medical observation upon arrival in Macau. Jefferies pointed out that Guangdong remains the largest China province of Mainland China visitors, their arrivals accounting for 58% of all Chinese mainland arrivals in 2020 and 61% in the current year. “The Guangdong circumstances are another setback to the eventual Macau recovery,” the analysts wrote. “Although we expect this is a short-term negative impact, we believe this could lead to Macau being incrementally more cautious about opening its borders further to non-Mainland China visitors, especially with Taiwan still reporting +350 daily new cases.”
Newslines
For every action: Better Collective last week completed the acquisition of the Action Network with a surprise share issuance which raised SEK1.5bn or circa €149m. The shares were priced at a discount to the prevailing share price of 9.2%. The company said the issue was significantly oversubscribed due to high demand from institutional and other professional investors.” However, the share price subsequently fell to below the issue price as the market absorbed the news. “We suspect the market reacted negatively as it was not announced in conjunction with the acquisition of Action Network,” suggested the analysts at Redeye. “The market’s assumption was Better Collective doesn’t need to take in additional capital to finance the acquisition.”
Shakermaker: BetMakers attempted to gatecrash the bidding process for Tabcorp at the end of last week with a “indicative proposal” that would value the target at A$4bn. The unsolicited offer would see Tabcorp receive A$1bn in cash and A$3bn in BetMakers shares, leaving Tabcorp as 65% shareholders in the enlarged entity. BetMakers is advised by former Sportsbet and BetEasy founder Matthew Tripp. BetMakers joins Entain and Apollo in the queue of suitors. The shareholders’ verdict on the bid was negative - the shares fell 16% on the day of the news.
Wild thing: Bragg Gaming has acquired casino content provider Wild Streak Gaming for $30m. Bragg will pay $10m in cash and $20m in shares over the next three years. Wild Streak reported $1m in revenue and $233k EBITDA in FY2020 and $487k in revenue and $241k EBITDA in Q12021.
Hard currency: Esports Entertainment has closed a $35m private placement of 8% convertible notes with an institutional buyer. The notes have a maturity of two years and are convertible at a conversion price of $17.50 a share. Esports Entertainment said the cash would go towards “working capital and acquisition related expenses.” Esports Entertainment recently completed the buyout of the BetHard business for $27m.
One door opens: Century Casinos has confirmed that its properties in Poland have now reopened. The casinos were closed in March.
While another door shuts: Crown Resorts confirmed on Tuesday that its property in Melbourne would be shuttered for a further week meaning it will be closed to all gaming at least until 10 June.
What we’re reading
Tumbling dice: CNN on how the great reopening in Las Vegas.
Booster shot: On why the partnership between DraftKings and Boost is a ‘pit stop on the road to hell’.
What we’re writing
Retail therapy: The enthusiasm for retail betting in the US is palpable and might as well be happening in a parallel universe. For iGB.
Calendar
3 Jun: MGM Bernstein Strategic Decisions presentation
7 Jun: Fubo TV Wells Fargo Telco Day presentation
8 Jun: iGaming Next Bright Future (Day 1)
9 Jun: iGaming Next Bright Future (Day 2), SBC Digital North America (Day 1)
10 Jun: SBC Digital North America (Day 2)
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com