In this week’s piece we discuss five topics: 1) poor freight trends as it relates to our coverage; 2) softer U.S. GGR trends in June; 3) VAC’s valuation is near an all-time low versus its prior parent company MAR; 4) recently disclosed buybacks from CCL, and our analysis on why additional buybacks could be limited for at least a couple years; and 5) our thoughts on a possible sale/leaseback transaction at MGM for Bellagio and MGM Grand, and our analysis on what we think this could be worth to the stock. Please click the link above for the full report.
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Vegas Strip fundamentals have been mixed YTD, though we still think better than the sentiment. We see potential for revenue reacceleration in 2020 due to several tailwinds, which we’ll discuss and quantify, and we’ll also discuss some potential risks.
This is a recurring piece we write monthly where we track several key monthly indicators, which have historically led Macau GGR growth. The data points for the most recent month show only 7 of the 19 y/y indicators are better than the prior month versus 10 of 19 last month, though in many cases the y/y data points in the recent month were only marginally worse or marginally less positive than the prior month. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
For our Weekly Sho we've recorded a 20-minute video with 36 slides highlighting our current views as we head into another earnings season. The cruise line section begins at 4:03, the lodging section begins at 9:00, and the gaming section begins at 15:40. Enjoy the rest of your weekend!
20-minute video with slides highlighting our current views as we head into earnings season.
This morning (7/11/2019) ERI announced it’s selling two owned properties – Isle of Capri Casino Kansas City and Lady Luck Casino Vicksburg – to Twin River (TRWH – Not Covered) for a total of $230M, which according to TRWH represents an 8.4x LTM EBITDA multiple, which we believe is accurate.
Our coverage is up 24% YTD, on average, which is modestly outperforming the market. However, our coverage remains 21% below 2018 highs, on average, and also 10% below 2019 highs, on average, all while the market is near an all-time high. Our coverage mostly remains out-of-favor, in our opinion, but we see some opportunities. Within lodging our best idea is VAC. Within gaming our best idea is ERI. And within cruise our best ideas are RCL/NCLH.
The analyst day was not webcasted, and we counted close to 100 people in attendance. We thought the event was upbeat, as to be expected for an analyst day, but the stock traded down we think mostly because the long-term Macau targets were below expectations. WYNN also did not provide an update on 2Q, and capital return commentary wasn’t as aggressive as some may have hoped
In this week’s piece we discuss cruise line capacity growth into 2020. The growth rate of gross supply (i.e. total cruise ship deliveries) is accelerating modestly into 2020 and we’ll discuss with a couple charts.
May Vegas Strip GGR was released this morning which showed a decline of -11% y/y – entirely driven by continued weak baccarat play – below our expectation of -5% y/y. Had the month played in line with normal hold the result would have been in line with our expectation. Strip RevPAR was released this afternoon which showed an increase of 7.3% y/y, above our expectation of flattish. For the entire 2Q we estimate CZR Vegas revenue to be flat y/y and MGM Vegas revenue to be down slightly y/y. MGM Vegas and total consensus EBITDA for 2Q still seems too high to us, and CZR Vegas and total consensus EBITDAR for 2Q generally seems OK to us.
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