In this week’s piece we discuss some topics from the week, including 1) poor stock performance driven by coronavirus, including many stocks who have limited exposure to China; 2) a new CFO at PENN; and 3) an update on the timing of Japan gaming and how investors don’t seem very focused on the Japan opportunity, currently.
Search Coverage List, Models & Reports
Search Results1-10 out of 293
As we begin a new decade, we look forward with ten predictions for our coverage over the next ten years. We also look back at the top ten themes that characterized the last decade for our coverage, which resulted in meaningful change.
We last published about the rapid spread of coronavirus on Monday (1/20/20) after the first scare. The issue has escalated, and overnight China ordered travel agencies to suspend travel tours. Again, the timing is unfortunate because the Chinese New Year week-long period just began. China has seemingly been aggressive in its efforts to combat the coronavirus with travel suspensions, as they were blamed for a lack of transparency during SARS in 2003, but it also now appears that there could be a meaningful impact to 1Q earnings for those exposed to China.
In this week’s piece we discuss several topics from the week with charts, including 1) our near-term view on MGM following recent monetization, which we think will allow them to return 17% of the market cap to shareholders in 2020; 2) PENN’s rumored acquisition of Barstool Sports; 3) updates on the ERI/CZR merger; 4) read-throughs from airline earnings; and 5) leading indicators for Macau GGR.
The coronavirus in China has been spreading, and has been confirmed to be transferable between humans, which has caused new concerns. In the most recent update on Monday (1/20/20) the number of coronavirus cases had risen above 200, up from 41 since early January, and it appears to have spread to some other Asian countries. It’s also resulted in at least three deaths currently. This scare seems to have caused Hong Kong listed Macau gaming stocks to decline ~6% overnight. The timing is unfortunate because the Chinese New Year week-long holiday period begins January 24, which is a key travel period. This could be nothing, or it could be something, but at the least there could be an impact to Chinese New Year travel.
Each month we track several indicators, which have historically led Macau GGR growth by several months. The data points for the most recent month show 10 of the 19 y/y indicators are better than the prior month versus 14 of 19 last month. We chart each and we show a summary table in Exhibit 1.
MGM announced today an agreement to sell the MGM Grand Las Vegas real estate to a JV between MGP (50.1%) and Blackstone Real Estate Income Trust (49.9%). The transaction is valued at ~$2.5B or 15.75x rent and MGM will receive ~$2.4B in cash and ~$85M in MGP OP units – we assumed a $2.8B valuation at 15.5x rent. The JV will also acquire the real estate assets of Mandalay Bay from MGP and will lease both properties to MGM.
Today we upgrade shares of WYNN from Peer Perform to Outperform and establish a YE20 target price of $176, which is based on a sum of the parts of segment EV/EBITDA.
In this 35-page note we discuss our views on our coverage after the 2019 rally and how we see 2020 playing out; we discuss key themes and update our thesis with new charts; we preview each company into earnings; and we also change ratings for WYNN, BYD, and CHH.
November Vegas Strip GGR reported this morning showed a -3.1% y/y decline versus our estimate of +4% y/y. Hold hurt results by ~150pp relative to our expectation, so the core result was still softer than we expected. All other data was released early this afternoon, which showed Strip RevPAR up 5.7% y/y versus our estimate of +4% y/y. Oct/Nov GGR is down -6.3% y/y and Oct/Nov RevPAR is down -0.3% y/y, implying that December needs to be a very good month for the quarter to be in line with current MGM/CZR Street expectations of ~+2%-+3% revenue growth. Hold helps the December GGR growth rate by 11pp y/y after unusually poor hold in the year-ago period, but December will also need core strength to achieve current estimates, in our view, and the last week of the year is a key period.
- 1 of 30
- next →