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The Depth Report – Encouraging Signs in Casino Gaming

A week ago, we published a second recommendation on Las Vegas Sands (LVS).During the company’s earnings call, CEO, Sheldon Adelson spoke about his optimism that the gaming market would come back from Covid-19-related shut-downs. The key element of our long thesis on Las Vegas Sands is that the company’s casinos are going from closed to open meaning that sequential results will start to improve now. Last week, Matt Maddox, the CEO of Wynn Resorts (WYNN), gave some encouraging data and more specific guidance.

The Wynn Details:
First, Maddox talked about the Las Vegas market. The Wynn casino there did $9MM in EBITDA during 26 days in June. The company did an additional $5MM of EBITDA during July. The decrease was due to the spike in coronavirus cases in California and Arizona that month. Last year, in the second quarter, Wynn did about $45MM of EBITDA per month in Las Vegas and in the third quarter, the company did almost $30MM a month. While the current results are much lower, one of the reasons the gaming stocks are trading as cheaply as they are is because of concern that if the shut-downs last too long, they could go out of business. The fact that Wynn is cash flow positive in Las Vegas even with limited travel and occupancy is a good sign for the industry.

Later in the call, there was disclosure that in Macau, Wynn thinks they can get to break-even at 40% of 4Q 2019 business levels. Maddox talked openly about his expectation that the company would be at that level in its two Macau casinos by the 4th quarter of this year. If that happens, it looks like Wynn can stop the cash outflow and hold on until the shut-downs end and business improves.

While two months of Wynn profitability in Las Vegas and projections of break-even/profits in Macau this year isn’t a guarantee of anything for Las Vegas Sands, we do see these comments by a chief competitor as additional confirmation of our long thesis on LVS.

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