As the industry’s suppliers seek to make up lost revenues after the months-long industry shutdown due to the Covid-19 pandemic, they face an uphill battle, because there will be fewer slot machines and table spaces as reopening casinos seek to guard the safety of customers and employees, according to an investor note issued last week by Union Gaming Securities LLC.
“We fear that less floor space post-reopening will lead to incrementally more competition for said floor space and hurt supplier pricing power even further,” wrote Union analysts John DeCree and Sam Ghafir. “While the market largely expects reduced product sales, the risk to leased fees and participation rates is still unclear.”
The note singled out leading slot supplier IGT, which posted a net loss of nearly $248.3 million for the first quarter of 2020, compared with a $40.3 million profit in the corresponding period a year earlier.
“With casino operator budgets now constrained, IGT’s management has taken on multiple initiatives to preserve cash and weather the storm,” the analysts wrote, but added that they were “confident” measures announced by IGT to cut costs, amend its revolving credit facilities and loan agreements, and end dividends—in combination with the group’s $2.2 billion of liquidity—“should provide ample resources to weather the storm and cover its modest near-term debt maturities.”
