4 Jun: MGM hammers home igaming message +More
MGM fireside chat, Goldman Sachs on Genius Sports, US gaming and footfall analysis, Playmaker TSXV float
Good morning. Welcome to an end of week newsletter covering the latest from MGM Resorts International as it took its turn after LVS yesterday in front of the digital fireside at the Bernstein Strategic Decisions conference. We then have some debut coverage of Genius Sports from house brokers Goldman Sachs and two pieces of analysis on the trends in US gaming from Jefferies and Deutsche Bank. Finally, there is brief news from Playmaker which successfully floated yesterday on the Toronto TSX Venture Exchange.
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MGM Resorts International fireside chat
Something got a hold of my heart: MGM Resorts International’s CEO Bill Hornbuckle and CFO Jonathan Halkyard took their places in the fireside chat hot seat to speak with Bernstein’s Vitaly Usmansky to talk all things digital, Vegas and Macau (with some Japanese comment thrown in). They started as per their recent Q1s by extolling the virtues of the BetMGM business and touching on how iGaming, which provides the “real value” to MGM, can gain greater legislative acceptance. Hornbuckle said iGaming was “one more step on” from sports-betting for any legislator: “Once you are in the sports-betting business and you get confidence in the social issues, you can gain even more confidence. It will take time and education. That more than anything else. No one is going to go straight to iGaming; it’s not for the weak of heart or the short of wallet.”
The two of us: Asked whether the joint-venture nature of the BetMGM partnership with Entain worked against the unitary control of some of their competitors, Hornbuckle stuck to the script on the positives. “They (Entain) have proven they know how to make money in this space,” he said. “They came with great management, great content, a very good tech stack. And we continue to improve on that. We have converted a European user experience into a really good user experience for US sports.”
“The downside is we don’t own the whole thing and we're not crazy about that. But we don’t pay the 10/12% for tech (that others do). Margins are better and it makes the business more sustainable. Plus, MGM owns the whole ecosystem side.”
Back to the land: The MGM team had a similar message to LVS yesterday: while Vegas is “on fire” according to Hornbuckle and likely to see “out of scale margins” for the next six months (see below analysis on US gaming), Macau is still finding its feet post-Covid. While there will be some “ebbing and flowing” for the rest of this year, the longer-term is rosier with penetration into the Chinese customer base “de minimis” as it stands. “The bigger the market gets, the more it becomes a destination,” he said. “It just becomes more appealing.” In Japan, meanwhile, Hornbuckle noted that the long drawn out IR bidding process - likely to be narrowed down to two cities including Osaka - should be concluded by this time next year.
Genius Sports analyst note
Warranted attention: House broker Goldman Sachs has issued an initiation note on Genius Sports suggesting it is “best in class provider of ‘picks and shovels’ to the rapidly growing globe; online sports-betting industry.” They add that exposure to Genius allows investors the opportunity to invest in the sector growth while not having to worry about who will be the market share winners. There was one slice of new information in the note; talking about the recently signed deal with the NFL for data and ad space, the analysts noted that the previously disclosed 11.25m share warrants that the NFL received as part of the deal (worth $170m according to the Genius Q1 statement) represented only half of the warrants with the rest of the 22.5m to be handed over over the lifetime of the six-year deal.
US gaming analysis
On the front foot: Both Jefferies and Deutsche Bank have taken a look at US gaming trends as the US Covid recovery gains pace. The monthly footfall analysis of gaming traffic from Jefferies provides a picture of marginally improved foot traffic which was down 26% on May 2019 compared with a 28% two-year comparison decline in April. They noted there was a period of deceleration in mid-May before things improved at the end of the month due to Memorial Day weekend. In Vegas Jefferies suggest the trend will accelerate into June and July. There was less good news in Pennsylvania, Illinois and Michigan where foot traffic was down 60%, 41% and 76% on May19.
Everyone’s a winner: Looking at recreational spend patterns, Deutsche Bank’s analysts reiterated their view that gaming would be a winner from the Covid recovery. The team noted that since Q320, the gaming sector - including casinos, lotteries and horseracing - has “materially outperformed” peer recreational industries in terms of spend. “The magnitude of the outperformance has accelerated materially in 2021 to date, with April marking the widest gap between gaming and recreational spend comps in the post-lockdown era,” they noted.
“While casinos get lumped into the ‘recovery trade basket’, as they should from a big picture perspective, the reality is, casinos have likely benefited considerably from the disruptions in adjacent industries.”
Much of this good news is already baked into sector valuations, meaning that Deutsche Bank believes it is time to pick the winners from the pack. They opt for Boyd Gaming, Red Rock Resorts, Golden Entertainment and Caesars believing they offer value compared to their peers.
Playmaker trading debut
Handing over the baton: Playmaker, the ‘sports digital ecosystem’ which recently bought the Latin American-facing Futbol Sites for C$44m, listed on the Toronto Stock Exchange yesterday. It also announced the appointment of Jake Cassaday as COO. Cassaday was previously at the venture capital fund Relay Ventures which is a key investor in Playmaker. Playmaker says it’s “mission” is to monetize sports fans partly via partnerships with sports-betting companies as well as advertisers, leagues and teams. Futbol Sites has a roster of 10 premium domains including Bolavip, Redgol and Futbol Centro America which the company says attracts 50 million unique users a month. The Toronto float was facilitated via a transaction with Apolo III Acquisition Corp. At the time it raised C$24m. No details on revenues for Futbol Sites were disclosed. The Q121 results commentary said the company was pre-revenue in the first three months of the year but that revenues would come from programmatic advertising, direct campaigns and through agencies specializing in gambling clients.
What we’re reading
Now playing: AMC is an options market puppet says Robert Armstrong at the FT. “While market makers were “caught off guard” by earlier meme-stock vortices, this time they think the market makers — the likes of Citadel Securities and Jane Street — are ‘absolutely minting money.’”
Calendar
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