Even though the Nevada Legislature has been hesitant to bankroll a new stadium for the Oakland Athletics, Jefferies gaming analysts are keen on the deal struck with the A’s and Bally Entertainment. In a research note published this morning, Jeffries wrote that Bally’s better-than-expected first-quarter results and the baseball transaction “support our view that the company remains in its formative stages, between its land-based and digital presence.”
Jefferies cautioned that Bally’s various capital projects will require additional capital, “which could pressure the shares.” BALY stock was trading at $15.50 a share at the time of the report, which placed a “Hold” rating on Bally’s.
Silver State legislators are reportedly reluctant to fund anything beyond $195 million in transferable tax credits for the $1.5 billion stadium on the site of the Tropicana Las Vegas. The A’s had requested $395 million in governmental subsidies. If the $200 million gap is to be closed, it will have to be by Clark County via a bond offering.
State lawmakers say the A’s haven’t submitted a clear-cut proposal and their tax-credit counteroffer is contingent on Clark County acting first and quickly, as the legislature is winding down until its next session in 2025. June 5 is the cutoff date for a state-level deal.
As for the first-quarter numbers announced on May 9, they included revenue of almost $599 million, compared to Jefferies’ expectation of $592.3 million and Wall Street consensus of $595.2 million. Cash flow was $157.6 million, slightly better than Jefferies had anticipated at $153.9 million.
Returning to the topic of the baseball park, which would require demolition of the venerable Tropicana, Jefferies reminded readers that Major League Baseball has yet to approve the relocation (although MLB Commissioner Rob Manfred has been actively advocating for Las Vegas). Also, the “binding agreement” with Bally’s remains contingent on the actions of the legislature. Still, “The agreement would drive visitation, allowing for increased spending and stronger marketing partnerships for BALY.”
In other Bally’s-related items, the company expects the Medinah Temple-based temporary casino in Chicago to generate a $50 million return on investment during its first full year of operation. Capex reinvestments in casinos in Atlantic City, Rhode Island, and Kansas City were touched upon. Work at Bally’s flagship, Twin River Lincoln, is done and that at Bally’s Kansas City is slated to wrap by summer’s end. The Bally’s Atlantic City renovations “continue to progress.”
Digitally, the company is keeping its eye on the Brazilian market, should opportunities in that country arise. The British government’s long-awaited White Paper on gambling was welcomed, as “the new rules would benefit larger operators in the long-term.” And stateside, BallyBet is attempting to reboot sports betting in seven states and at four brick-and-mortar locations, which were not disclosed.
Jefferies remains bullish on Bally’s partnership with Sinclair Broadcasting, which “allows the company to catch up to other operators in digital wagering, capturing [mid-single-digit] market share by 2023-24.” However, Jefferies foresaw “difficulty to execute on the digital strategy, failing to launch digital product in at least 10 states by year-end next year, and continued decline in [regional sports network] subscribers exceeded growth in mobile subscribers.”
In the brick-and-mortar realm, all things look promising. Jefferies boffins reported that top-line numbers at Bally’s terrestrial casinos have returned to pre-COVID altitudes, as cash flows improved on pre-pandemic levels.
