FANTINI ’ S FINANCE
Hurry Up and Wait
Dips in operator stocks can be an investment opportunity
BY FRANK FANTINI
There ’ s an old army expression that equity investors are learning to understand : Hurry up and wait .
The hurry up has been the anticipation of earnings every quarter . We eagerly await the numbers . The wait has been that nothing changed , so wait for yet another quarter .
In gaming , it ’ s become almost a mantra . We repeat : Customers are resilient , though low-value players are starting to reduce spending . The hardwon margin improvements achieved to survive Covid are being sustained into a new normal , though inflation threatens some erosion .
The Las Vegas Strip continues healthy , Macau is bounding back , the Las Vegas locals market grows steadily with the population , and other regional markets are softening . Oh , and let ’ s add that we ’ re all waiting on the economic recession that has been promised again and again ( the latest worries being student loan repayments diverting consumer spending ).
Eventually , the recession will come , though whether that ’ s next week or next year or later is anyone ’ s guess , with the emphasis on guess .
Here is what we do know . The stocks of casino operators have sold off . Take any favorite company . Want to enjoy the benefits of the Las Vegas Strip ’ s robustness and Macau rebound ? Well , Wynn Resorts is 24 percent off its 52-week highs and MGM is down 32 percent .
Love that growing Las Vegas locals market ? Try Red Rock Resorts down 22 percent despite the pending opening of a major new property , or Golden Entertainment down 30 percent .
Like a regional company that steadily grows profits and has a pipeline of sure-fire growth projects like Churchill Downs ? It ’ s 26 percent below its high .
How about a company that enjoys both a big Las Vegas Strip and diversified regional presence along with a digital gaming kicker ? That would be Caesars . It ’ s down 28 percent .
How about a regional company in two growing markets that produces almost guaranteed growth , has a balance sheet so clean you can eat off of it and is a synonym for free cash flow ? Try Monarch Casino — down 28 percent .
Or how about a small company with two major growth projects almost assured to more than double EBITDA ? Try Full House Resorts , down a punishing 60 percent .
We could go on to the rest of the casino operators , but the story is the same : stock prices are down even though , again for the zillionth time , business is resilient and / or rebounding .
Heck , even the rock-solid raise-dividendshigher-and-higher REITs aren ’ t immune . VICI is off 19 percent and Gaming & Leisure Properties 18 percent . For the record , VICI ’ s dividend yields 5.9 percent and Gaming & Leisure ’ s 6.5 percent . Take that , faint of heart who are fleeing to bonds .
We could go on to the rest of the casino operators , but the story is the same : stock prices are down even though , again for the zillionth time , business is resilient and / or rebounding . It ’ s worth noting that this gaming bear market is occurring even as companies dramatically improve balance sheets , initiate or increase dividends and , in several cases , have growth projects baked in .
It ’ s also worth noting that these are declines from their 52-week highs , not from the higher levels that can be achieved when full value eventually is given for their cash flows .
So , barring a deep recession that knocks down earnings enough to justify today ’ s valuations , we might be in a period where casino stocks are bargains for the long-term investors . So , hurry up and buy now , then wait for your returns .
Yose is Back It is interesting to see that Light & Wonder has retained Mark Yoseloff as a table games consultant .
One of the mergers in the series of them that created Light & Wonder was the acquisition of Shuffle Master , the company Yoseloff ran and built into a $ 1 billion market cap table games powerhouse . He possesses one of the most brilliant minds in the gaming industry , and it ’ s good to see him back in a formal role at a game company .
What Does BMM Mean ? Talking about familiar folks showing up in new places . BMM Innovation Group has just hired Laura Olson-Reyes to head its communications .
It may be difficult to believe now , but highflying Aristocrat was once in dire straits in the Americas . The company brought in Gavin Isaacs to right the ship . His management team included some young stars like Kent Young , who headed sales , and Laura in communications . Needless to say , they and their successors didn ’ t just right the ship , they built today ’ s leading games company .
Laura went off to other stops . One of my favorite stories was when Laura headed communications at Bally Technologies ( now part of Light & Wonder ). G2E then had a communications industry luncheon in which various awards were presented . In this instance , award after award was pesented to Bally . It was a clean sweep . Not one other company got an award .
When each Bally award was announced , a different member of Laura ’ s team went up to receive it . She never got on stage . Winning every single award said a lot about Laura ’ s leadership . Allowing her team to get all of the credit said a lot more .
So , now Laura is at Martin Storm ’ s BMM . Oh , and what does BMM stand for ? In this case it means hiring Laura is your Best Move , Martin .
Frank Fantini is principal at Fantini Advisors , investors and consultants with a focus on gaming .
12 Global Gaming Business NOVEMBER 2023