Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Macau's gaming bureau reported June gross revenue from games of fortune in the region was down 62.1% year-over-year to 2.477B patacas. Operators in the Macau gaming space include Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN) and Melco Resorts (MLCO).
Casino Workers at four Atlantic City casinos reached a tentative agreement with their companies late Thursday night, in advance of a July 1 strike deadline. The union’s worker negotiating committee at the MGM-owned Borgata and Caesars Entertainment-owned Caesars (CZR), Harrah’s and Tropicana casinos have approved the agreements and will set a date for a ratification vote from the entire membership soon. A strike deadline remains in effect for Hard Rock casino for July 3 and strike pay signup will begin tomorrow at 8am on the Boardwalk in front of the property.
Nevada reported May Las Vegas Strip gaming win was up 11.62% versus last year to $731.52M.
Kalamba Games and Bragg Gaming (BRAG) announced an extension of their existing agreement pursuant to which Kalamba will now distribute a selection of its slots on Bragg's Remote Game Server, or RGS, into regulated markets in the U.S., as well as in Ontario, Canada. Kalamba and Bragg's Oryx Gaming originally partnered in 2017 through an agreement which resulted in Kalamba launching its iGaming content on the Oryx RGS in multiple global markets.
Genius Sports (GENI) and Clue have launched an integrity intelligence platform. As the integrity partner to over 150 leagues and federations, Genius Sports will use the new system to help anticipate and detect global trends in betting-related corruption, support investigations and provide increased visibility to sports organizations worldwide. Clue's proprietary intelligence platform will heighten efficiency and interoperability between Genius Sports' Integrity, Trading and Quality Assurance teams, based across four continents. Clue's system also provides a centralized digital vault that will house Genius Sports' entire library of integrity risk assessment reports. The company's team of analysts will be able to access and analyze every report, cross-referenced by a detailed red, amber, or green risk assessment, graded on the potential level of integrity risk. Through Clue's software, each report will be indexed against news articles and blogs, match footage and analysis.
BetMGM, a sports betting and gaming entertainment company partnership between MGM Resorts and Entain Plc (GMVHF), will become the exclusive sportsbook of the BetQL Network, Audacy's (AUD) network of sports betting content heard across its broadcast portfolio and digital platforms, the companies announced. The partnership, The BetQL Network presented by BetMGM, is an exclusive multi-year agreement that "significantly expands the current relationship between BetMGM and Audacy," the companies noted. "We're excited to further our strategic partnership with Audacy and to bring our market-leading sports betting and gaming entertainment content to millions of listeners nationwide across the entire BetQL Network platform," said Matt Prevost, chief revenue officer, BetMGM.
OCEAN STATE CASINO PROPERTIES: Gaming and Leisure Properties (GLPI) announced that it has entered into a binding term sheet with Bally's (BALY) to acquire the real property assets of Bally's two Rhode Island casino properties - Bally's Twin River Lincoln Casino Resort and Bally's Tiverton Casino & Hotel - subject to customary regulatory approvals with Bally's Twin River Lincoln Casino Resort also subject to lender consent. Pursuant to the terms of the transaction, Bally's will immediately lease back both properties and continue to own, control, and manage all the gaming operations of the facilities on an uninterrupted basis. Total consideration for the acquisition is $1B and GLPI expects the transaction to be accretive to earnings upon closing in late 2022. GLPI intends to fund the transaction through a mix of debt, equity, and OP units. Both properties are expected to be added to the existing Bally's master lease between GLPI and Bally's, with incremental rent of $76.3M. The Master Lease has an initial term of 15 years followed by four five-year renewals at the tenant's option. Normalized rent coverage on the master lease is expected to be 2x in the first calendar year following the completion of the acquisition of the real property assets of Bally's Rhode Island properties. In connection with GLPI's commitment to consummate the Bally's acquisitions, it also agreed to pre-fund, at Bally's election, a deposit of up to $200M, which will be credited or repaid to GLPI at the earlier of closing and December 31, 2023, in either case along with a $9M transaction fee payable at closing. If all third-party consents and approvals for the acquisition of Lincoln are not timely received, then GLPI will instead acquire the real property assets of the Hard Rock Hotel & Casino Biloxi in Mississippi along with Bally's Tiverton Casino & Hotel, for total rent of $48.5M, at the same combined 7.6% capitalization rate with total a payment of $635M. In that event, GLPI will also have the option, subject to receipt of required consents, to acquire the real property assets of Lincoln prior to December 31, 2024 for a purchase price of $771M and additional rent of $58.8M.
After the announcement, Morgan Stanley analyst Ronald Kamdem called the sale-leaseback transaction "a major positive" for Gaming and Leisure. Bally's Rhode Island properties, which are currently the only two gaming facilities in the state, have delivered strong performance and the deal diversifies Gaming and Leisure's portfolio into their 18th U.S. jurisdiction, said Kamdem. The transaction also comes with a conservative structure that offers G&L downside protection and an opportunity for additional long-term growth, according to Kamdem, who reiterated an Overweight rating on G&L shares.
NFL LEANS IN: The NFL on Tuesday announced David Highhill as vice president, general manager of sports betting, the league's first position solely focused on overseeing its business in the legal sports betting industry, according to David Purdum of ESPN.com. Highhill has been with the NFL for 10 years and will make the transition over from the corporate strategy group, where he led the league's go-to-market sports betting initiatives. In his new role, he'll reportedly be tasked with spearheading efforts to safeguard the integrity of the game from gambling-related harm, move forward the league's brand and reputation, raise the value of the NFL's data and intellectual property and drive fan engagement nationwide. "It's a growing market, it's grown a lot in the last three or four seasons," Highhill said. "What's ahead is the exciting part of the opportunity."
MOVING AT A TERAPINS PACE: Mobile sports betting in Maryland inched forward on Wednesday when the Maryland Sports Wagering Application Review Commission met to hear draft regulations and applications for the competitive bid licenses for sports betting in Maryland, of Legal Sports Report reported. Beyond light discussion, the SWARC did not make any further steps and launch details have not been disclosed. Last week, Hogan sent a letter in an effort to apply pressure on the SWARC to speed up the start of mobile sports betting to meet his September 8 launch goal, but the committee held steadfast.. The commission reportedly may approve the regulations and applications at its next meeting, which is scheduled for July 20. A total of 60 mobile and 30 retail licenses will be given out in Maryland.
ANALYST COMMENTARY: Stifel analyst Steven Wieczynski lowered the firm's price target on Bally's to $29 from $49 and maintained a Buy rating on the shares following a week in which the company disclosed terms for a Dutch auction tender, three-year financial projections, and a $1B sale-leaseback of Rhode Island properties with Gaming and Leisure Properties. The analyst, who also cites "credible news flow" regarding potential terms for the forthcoming U.K. online gambling regulatory review, has updated his thoughts on Bally's to account for all of this news, but remains constructive given what he still sees as a favorable risk-reward.
Barclays analyst Brandt Montour initiated coverage of the U.S. gaming, lodging and leisure industry with a Positive view. Against a deteriorating macro backdrop, demand at hotels, casinos and cruise lines has continued to hold up well, Montour told investors in a research note. Land-based gaming equity values are "compelling, and sentiment is especially poor," though there may be greater potential downside in a recession scenario, says the analyst. For digital gaming, Montour is most constructive on "omni-channel opportunities," as well as the longer term potential for the "nascent" internet gaming business. He views Caesars as best positioned based on a "compelling" free cash flow valuation and its peak digital losses "moving to the rear view." Montour put Overweight ratings on Las Vegas Sands, Caesars, Penn National Gaming (PENN) and Boyd Gaming (BYD). He put Equal Weight ratings on Wynn Resorts, DraftKings (DKNG) and Bally's. The analyst views Penn as a "well-operated, diversified" U.S. regional casino company, with a digital sports and gaming business that is closer to profitability than any of the other major operators, and a "robust omni-channel strategy that should eventually reinforce its core business."
B. Riley analyst David Bain lowered the firm's price target on Genius Sports, Caesars and Gan Limited (GAN) to $5.50 from $9, $128 from $149 and $6.50 from $10 respectively. Bain kept a Buy rating on the shares of all three companies. The analyst reduced gaming stock price targets to "better encapsulate macro risks/market conditions." However, the resulting valuations "still leave significant share price upside," Bain told investors in a research note. The analyst believes his valuation methodologies "represent a fairly strong hedge" and notes the price targets "still leave gaming stocks undervalued, many of which have potential to double in stock price over the next twelve months." A look at past economic softness shoes that many gaming stocks are oversold, wrote Bain.
JMP Securities analyst Jordan Bender initiated coverage of Flutter Entertainment (PDYPY) with an Outperform rating with a price target of 15,500 GBp, down from 15,550 GBp. The analyst thinks FanDuel can maintain its top market share position. Flutter has a portfolio of "market-leading brands" across top regulated markets globally, Bender told investors. Bender also initiated coverage of DraftKings with an Outperform rating as well as a $25 price target. The analyst believes the shares will see a positive re-rating as the company approaches profitability. Bender told investors that DraftKings is a high-growth, vertically integrated, gaming technology company with a top-three market share in the U.S.. He sees the company growing revenue at a 19% rate annually through 2030. Additionally, he initiated coverage of Penn National Gaming with an Outperform rating and $52 price target. The analyst values the company's core business at $44 per share, which implies the market is ascribing no value to Barstool. He values Penn National's online business at $8 per share and says the stock is currently reflecting a "financial crisis scenario." The market is now reflecting a scenario where Penn National's EBITDAR will decline 20%-25% from 2023 consensus estimates for Penn's regional casinos, Bender tells investors in a research note. He notes that there has been no evidence in his checks in the regional markets of softness from inflation, gas prices, or the stock market impacting the consumer. Lastly, the analyst initiated coverage of Bally's with a Market Perform rating and no price target. The analyst believes the shares are fairly valued given the uncertainties around regulatory changes in the U.K., projected inflation costs and its online ramp and trajectory. However, he believes Bally's has the tools to compete in the internet gaming market.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).