Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Standard General/Bally’s
Jefferies’ David Katz March 18 reviewed Standard General’s offer to acquire Bally’s. “The terms of the latest proposal include purchasing all outstanding shares of Bally’s for $15 (below its January 2022 bid of $38),” Katz wrote. “This is a 28% premium to the March 8 closing price, implying a 7.8x EV/EBITDA multiple on our ’24E EBITDA. After the announcement, the company formed a special committee to consider the proposal that will ultimately provide a recommendation to Bally’s. Given the significant financing challenges ahead in Chicago, Las Vegas and, prospectively, New York, and that Standard General is the largest shareholder at 30%, we think the bid has a reasonable likelihood of being successful at its approximate level plus a modest bump.”
JPM Gaming & Lodging Forum
Writing about the JPM Gaming & Lodging Management Access Forum, J.P. Morgan analyst Joseph Greff concentrated on gaming in the U.S. in a March 18 note.
“We see the Las Vegas Strip as generally superior to other domestic gaming markets, with (it seems) a never-ending list of city-wide events that continue attracting group/convention/leisure guests,” Greff wrote. “We get the sense that management teams may be frustrated with the quarterly idiosyncratic put-takes associated with these volatile outcomes (i.e. Super Bowl, F1, etc.), but our view is that the general trajectory of demand-inducing events should allow this market to grow overall. Margins, similar to Regionals, continue to be at the forefront as investors digest union-related wage increases and headwinds associated with insurance/utility costs. Digital strategies remain a key priority for management teams as the battle for profitability and market share is driving increased emphasis on product enhancements. We like DraftKings, Caesars, and MGM for primarily domestic/digital exposures.”
Golden Entertainment
Truist Securities analyst Barry Jonas, in a March 15 statement, noted that the company is initiating coverage of Golden Entertainment “with a Buy rating and $45 PT based on 7.5x our 2025E EBITDA. Now a Nevada pure-play with a unique footprint in our coverage, we see a setup for inflecting organic growth in the U.S.’s most favorable gaming market. Golden now has one of the best balance sheets in gaming, with an appetite for increasing capital returns and mergers and acquisitions. We also believe the potential sale value of its real estate implies the current valuation includes no value for its operations.”
Macau operations
Jefferies analyst David Katz in a March 18 note, looked at prospects in Macau: “Barring Galaxy and SJM, Hong Kong-listed related stocks are trading below one standard deviation from mid-cycle multiples on forward EV/EBITDA, despite earnings growing in both 2024 and 2025. Amongst the six operators, we have Buy ratings on Galaxy (only concessionaire to pay dividends), MGM China (increasing market share) and Sands China (the largest number of hotel keys). For U.S. names, valuation has not been a key driver of stocks, rather the outlook for the market longer term. MGM remains at Buy with Macau among the bullish factors, but also domestic digital. We believe Las Vegas Strip and Wynn Resorts names could be range-bound, remaining below 10X EBITDA (vs. historical 10x-14X) pending any change in the dynamics of the negative China macro.”
