Gaming stocks jump on speculation over potential casino re-openings

Gaming stocks jump on speculation over potential casino re-openings

  • Howard Stutz, CDC Gaming Reports
April 28, 2020 11:21 AM
  • Howard Stutz, CDC Gaming Reports
  • Other

The notion that some states may allow limited casino and live gaming operations to restart operations next month boosted the gaming sector during Monday’s overall upswing in the stock markets.

The Dow Jones Industrial Average was up 1.5% to finish above the 24,000-point mark for the first time since early March. The Nasdaq was up 1.1%. There was just one decliner in the gaming sector on Monday, equipment provider Galaxy Gaming.

Notable gaming industry risers were MGM Resorts International, up 9.25%; Eldorado Resorts, up 14%; Wynn Resorts, up 8%; and Las Vegas Sands Corp., up 5.94%. Shares of gaming equipment providers were also up Monday; International Game Technology was up 3.5%, while Scientific Games grew 8.84% and AGS was up 13.46%.

Governors, tribal governments, and gaming regulators closed nearly 1,000 casinos in 43 states beginning in mid-March in an effort to slow the spread of the COIVD-19 coronavirus pandemic.

The only announced casino reopening was from Idaho’s Coeur d’Alene Tribal Council, which plans to reopen the Coeur d’Alene Casino on Friday. Several Las Vegas Strip resorts are accepting hotel room reservations for mid- or late May, including Treasure Island and Wynn Las Vegas. However, Nevada’s governor has yet to provide a firm date when the nation’s largest gaming state will begin to reopen.

Meanwhile, Southern California’s San Manuel Band of Mission Indians said Monday it was extending the closure of its San Manuel Casino through May 31. The tribe said in a statement it was paying the resort’s employees during the shutdown.

As states reduce the closures of nonessential businesses, such as restaurants and certain services, analysts said some casinos could reopen, although with an assortment of social distancing measures and safety precautions included in an effort to satisfy a wary public.

Several ideas have already been spelled out by casino companies, including limits on table game seats, increased spacing between slot machines, temperature checks for customers as they arrive at a property, a requirement that both customers and employees wear masks and gloves, and enhanced cleaning operations throughout the properties.

“It is a given that, when casinos reopen, visitation and gaming position occupancy will be limited to roughly 50% for a 60-90-day period to give regulators and state health officials time to monitor reinfection rates,” Nomura Instinet gaming analyst Harry Curtis told investors.

Montana is expected to re-open nonessential businesses next week, including the state’s tavern market, with social distancing measures in place. Las Vegas-based Golden Entertainment has a large slot machine route operation in Montana and the company’s stock price jumped 9.76% on the Nasdaq Monday.

Meanwhile, Jefferies gaming analyst David Katz noted Sunday that credit markets have been favorable to the gaming sector. Wynn Resorts upsized a debt offering from $350 million to $600 million two weeks ago and MGM Resorts last week priced $750 million in debt when the company was seeking $500 million. Gaming equipment providers were also active in the credit markets; Everi Holdings took out $125 million in new debt, and AGS is seeking $95 million.

These are not surprising given the ongoing expected support from the banking community, which also includes covenant holidays in many cases,” Katz told investors. “Therefore, with most companies in our gaming coverage raising provisional capital and postponing covenants, liquidity should be beside the point, for the time being, assuming economic recovery begins over the next few weeks.”

Curtis suggested regional casino operators Boyd Gaming Corp. and Penn National Gaming would benefit from having some casinos re-open. Boyd has 29 properties in 10 states, while Penn operates 41 casinos in 19 states.

Still, he said the next three months could be the worst of the COVID-19 disruptions for Boyd and Penn.

“(Cash flow) should turn gradually positive through (the) third quarter as casinos reopen with lower revenue, but also much reduced operating costs,” Curtis told investors. “There is little incentive for casinos to reopen unless they are cash flow positive. By (the) fourth quarter, both Boyd and Penn should return to profitability, albeit small.”

Boyd, which reports earnings on Tuesday, saw its share increase 6.34% on Monday. Penn was up 9.36%

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.