What Happens in Vegas... Bank of America Meets with Gaming Management
In a report published Sunday, Bank of America Merrill Lynch analyst Shaun Kelley noted key takeaways from Friday's meetings with Gaming management teams in Las Vegas.
Las Vegas Strip Strength
Kelley reiterated a Buy rating on MGM Resorts International (NYSE: MGM), Las Vegas Sands Corp. (NYSE: LVS), Wynn Resorts Ltd. (NASDAQ: WYNN), and Pinnacle Entertainment Inc. (NYSE: PNK). The analyst favored MGM resorts on the expectation for positive incrementals due to the strength on the Las Vegas strip. Bank of America noted that trends on the strip are benefitting from "strong convention mix, improving corporate spending and increasing leisure vacation."
The analyst expects MGM Resorts to trend in-line for the first quarter at +10% RevPAR. Kelley added that improvement of lead volumes and corporate spending could also help flow-through, F&B, and other revenues. He continued, "There is limited room for group pickup in 2014 with 80-85% of business contracted, but the promotional environment is rational despite the wind-down of disruptions".
Shaun Kelley reported that Wynn Resorts, Las Vegas Sands, and MGM Resorts have maintained their "enthusiasm" and have not been impacted by the recent macro news out of China. The analyst noted "Junket collection cycles, in particular, have not changed at all, while recent headlines regarding China Union Pay are not “new news” to the market and haven't resulted in any tightening as of yet." Kelley estimates that Las Vegas Sands will comp more rooms in Macau in 2014.
Bank of America is most bearish on International Game Technology (NYSE: IGT). The analyst cited publicized game-ops issues and "sluggish" replacements. Kelley noted that cost cuts will most likely be seen and felt in the company's financials in the second quarter.
The analyst is optimistic on Boyd Gaming Corporation (NYSE: BYD). Kelley commented that this suggests "that trends had bottomed in Atlantic City with upside coming from online gaming and property taxes." Bank of America reminds investors of long term structural issues concerns surrounding Boyd Gaming Corporation.
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