Wall Street Bets: Analysts take on Aristocrat/NeoGames, Light & Wonder, Las Vegas Strip

August 16, 2023 12:31 PM
Photo: CDC Gaming Reports
  • Rege Behe, CDC Gaming Reports
August 16, 2023 12:31 PM

Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.

Aristocrat Leisure/NeoGames

In an August 14 note, Jefferies equity analyst David Katz wrote that the announcement that Aristocrat Leisure is acquiring NeoGames “validates our valuation of the shares, which had been $23 prior to the announcement. We have argued that NeoGames has clear capabilities that position it competitively, most notably in the U.S. market. The deal has been unanimously approved by NeoGames’ board of directors. We believe the probability of the deal closing is high, given Aristocrat’s valuation of 11.4X EBITDA, its balance sheet strength (0.3X), and its regulatory standing in the U.S.

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Truist Securities analyst Barry Jonas also weighed in on NeoGames, writing that NeoGames second quarter EBITDA of $18 millon came in below our/Street’s $20 million/$19 million estimates, though management continues to execute before being taken out by Aristocrat (as the deal remains on track for first half of 2024). We remain Hold-rated and continue to see minimal risks to closing. Shares have traded sideways at ~$27 since the announcement in mid-May, and we maintain our $29.50 PT (the takeout price) and Hold rating. We modestly adjust our estimates to incorporate 2Q23 results.”

Light & Wonder

In an August 9 note, Fitch Ratings assigned a BB/RR4 rating to Light & Wonder’s eight-year senior unsecured notes. According to Fitch’s release, “Proceeds will be used to refinance the existing 8.625% senior unsecured notes due 2025. Light & Wonder’s Long-Term Issuer Default Rating is ‘BB’. The Rating Outlook is Stable

“Light & Wonder’s rating reflects its conservative leverage profile and solid expected FCF (free cash flow) margin for a gaming supplier and mobile developer. Fitch believes Light & Wonder’s credit profile remains consistent with a rating ‘BB’, due to robust FCF generation, strong liquidity, and still conservative leverage. Fitch forecasts Light & Wonder’s gross leverage will decline below 4.0x by 2023 through EBITDA growth.”

Las Vegas Strip room rates

In his room rates survey for Sept. 3-9, 2023, J. P. Morgan analyst Joseph Greff noted that midweek rates “are +9% and weekend rates are +6% (+7% overall)” compared to the same time period in 2022.

“By company: MGM rates are -5% for the midweek and +7% for the weekend (+1% overall); Caesars’ rates are +29% for the midweek and +17% for the weekend (+22% overall); Wynn rates are +30% for the midweek and flat for the weekend (+17% overall); Venetian/Palazzo rates are flat for the midweek and for the weekend (flat overall).”