Wall Street Bets: Analysts take on earnings from PENN, LVS in Macau, GLPI and Monarch

July 24, 2023 12:44 PM
Photo: CDC Gaming Reports
  • Rege Behe, CDC Gaming Reports
July 24, 2023 12:44 PM

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

In a July 24 note, J.P. Morgan analyst Joseph Greff wrote that the company was lowering its second quarter EBITDAR (net interactive loss and corporate expenses) forecast for Penn Entertainment to $479 million, “down from our prior $492 million and below current consensus’ $483 million, primarily reflecting lower reported monthly land-based GGR in its South Region, where we now estimate segment EBITDAR of $123 million, down from our prior $137 million.”

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“We rate Penn Neutral,” Greff wrote. “While we see the stock’s 2023 lease-adjusted-EV/EBITDAR valuation as relatively undemanding at 6.8x and investor sentiment no better than apathetic, we do not see a catalyst to expand the multiple.  We see better value elsewhere in our coverage universe.”

Jefferies equity analyst David Katz wrote July 23 that Las Vegas Sands’ Macau revenue and EBITDA from second quarter earnings was “considerably higher than our forecast, $1.601 billion vs. our $1.228 billion.”

“The quarter highlighted the critical questions for Macau since the reopening recovery began: What is the new normal revenue mix and therefore the associated margin?” Katz wrote. “As a consequence, investors are focused on the prospective read-across for Wynn, who has not indicated when it will report earnings as of yet. The elements are somewhat different, in that LVS was dragged down by the ramp of its newly repositioned Londoner, which Wynn does not have. As well, Wynn is generally positioned as a more premium offering, which could produce a different result.”

Fitch Ratings July 21 affirmed the long-term issuer default ratings of Gaming and Leisure Properties and its issuing subsidiary GLP Capital at BBB-.

In a note, the company stated that “In addition, Fitch has assigned a ‘BBB-‘ rating to GLP Capital’s delayed draw term loan and has affirmed GLP Capital’s senior unsecured debt at ‘BBB-‘. The rating outlook is stable.

“The affirmation reflects GLPI’s highly stable triple net lease REIT business model focusing on geographically diversified regional properties. Overall gaming REITs have weaker contingent liquidity compared to more traditional CRE property types, which is a drag on the rating. GLPI remains comfortably within its 4.5x-5.5x REIT leverage sensitivities.”

Commenting July 19 on Monarch Casino & Resorts’ second quarter report, Truist Securities analyst Barry Jonas noted the operator’s “record but in-line” second quarter earnings EBITDA ($42.1 million) and how the high-end continues to drive results, offsetting labor and energy cost creep,” Jonas wrote. “Importantly, the consumer has remained strong despite management caution last quarter (as was the case last year). Management continues to evaluate mergers and acquisitions (we sense nothing is imminent) and further capital returns could be on the horizon, with opportunistic share repos potentially offering some share price support. We tweak estimates and maintain our $95 PT, favoring strong positioning, balance sheet, and capital returns (1.6% dividend yield, but 8.4% assuming another $5/shr next year special absent merger and acquisition).”