Bally’s Corp. expects a 71 percent return on investment from its $70 million temporary casino at Medinah Temple in Chicago. That was the main takeaway from analyst Barry Jonas’ coverage of the 10th Annual Truist Securities Gaming, Lodging, Leisure & Restaurants Summit, held last week in Boston.
Projections by Bally’s for its $1.7 billion permanent casino in the Windy City were equally aggressive. The company anticipates an average slot win of $400 per slot per day, double the industry average, and $4,600 daily win per table game. (The casino will house 3,400 slots and 173 tables.) The anticipated return on invested capital is $250 million per year or 15 percent.
Interactive gaming, on which Bally’s announced a recent marketing pullback, is expected to show a profit in 2024. Management, Jonas said, “is seeing strong trends” in New Jersey, where a 3.5 percent market share is anticipated to double in the next year. Bally’s is currently looking to streamline its operations and jettison non-core assets, such as daily fantasy sports site Monkey Knife Fight, purchased for $90 million in January 2021.
The consensus of gaming operators at the summit was that while a recession may be looming, they’re seeing no signs of it yet. MGM Resorts International and Caesars Entertainment were looking forward to a robust event calendar in Las Vegas in 2023, with MGM enjoying the added tailwind of newly eased COVID-19 restrictions in China, where it operates two casinos and an MGM-branded hotel.
Jonas continued to see upside in Japan, although it now appears unlikely that the MGM’s Osaka megaresort will open before 2030.
BetMGM continues to be on track for 2023 profitability. Observed Jonas, “It’s no secret that MGM is interested in acquiring Entain … or at least their 50% of the BetMGM [joint venture], but we don’t believe any deal is imminent and management isn’t looking to do a deal at ‘any price’ — despite recent rumors.”
Caesars saw an interactive profit in October, but Jim “Mattress Mack” McIngvale’s huge World Series betting win “makes Q4 EBITDA contribution questionable,” noted Jonas. “The company has made strides in improving its sports offering, though thinks there’s much more upside to its current igaming platform.”
The company also talked up its Times Square casino proposal for New York City, which recently added Jay-Z and Roc Nation as partners. No additional zoning would be required, as Caesars would be redeveloping an extant building. “Though the [request for proposals] process is going to be very competitive (and likely expensive), CZR believes EBITDA contribution could be very meaningful should they win,” Jonas reported.
The other major operator present, Penn Entertainment (which has very little Las Vegas presence), reported “stable” customer trends heading into the fourth quarter. “The cashless-gaming rollout continues, with [management] seeing higher frequency visitation and greater gaming spend per trip from adopters,” added Jonas. The company also set out its priorities for 2023, including closing on the remaining 50 percent of Barstool Sports it doesn’t presently own.
Penn also hopes to consolidate its interactive tech stack and betting system stateside from Canada-based theScore. Heading into 2024, Penn leadership wants to have a universal-wallet system permanently in place and — since McIngvale sank its fourth quarter — hit sports-betting profitability in early 2023. Noting that Penn has two capex projects in the pipeline in Illinois, Jonas felt management “is being smart about capital allocation heading into the new year.” Given no debt maturities until 2026 and $2.7 billion cash on hand, Jonas believes Penn will be aggressive about buying back shares, currently some of the least costly in gaming.
Controversial DraftKings exuded confidence about its long-term strategy, citing profitability in unspecified states and upcoming launches in Ohio, Massachusetts, and Puerto Rico. DraftKings bosses expect to start operating in the black in a year and break even in 2024. “Internally, [management] sees the most room for improvement on their hold rate, which they’ve made strides in raising through larger adoption of parlays,” wrote Jones.
The Boston-based sports-betting giant was skeptical of newcomers like Fanatics, “given they’ll have to fight a two-front war (one, trying to launch new states effectively, while two, spending on promotions to gain market share in states already launched).” Instead, DraftKings expects potent international brands like bet365 to make more meaningful inroads. “We continue to see a path for more optimism as profitability kicks in, given we believe DKNG should be a [long-term] winner in the space,” waxed the analyst.
Everi Holdings was one of two major slot manufacturers represented at the Boston conclave. “Despite some negative momentum in its stock price (that we believe is unwarranted), EVRI’s fundamental momentum has continued across both Games & FinTech,” chronicled Jonas. With $100 million still in the kitty, Everi plans to continue stock buybacks. Its primary focus is on cashless gaming, with its product represented at 38 Penn casinos across 14 jurisdictions. Everi reported “higher-frequency visitation” and more gambling activity from users of the technology.
Also present was International Game Technology. “Vince Sadusky, CEO, noted that following a year of tenure at IGT, the company’s strategic long-term and short-term plans are trending well, highlighting its award for best new hardware launches during G2E.” Sandusky further told Jonas that “the company is not currently missing any structural pieces and drove significant value through the sale of non-core Italian proximity payment assets (which closed in Q3). Mr. Sadusky noted he is committed to driving equity value performance, with his compensation tied closely to IGT’s stock price.”
Recent lottery activity generated a $20 million revenue bump and supply-chain issues are said to be in the rear-view mirror. Most of the company’s lucre is derived from its ilottery and printing divisions, while slot sales are propelled by replacement of older machines and new-jurisdiction openings, in that order.
