With G2E behind us, attention now turns to third quarter earnings and the outlooks for the fourth quarter and 2023.
So far, two casino companies have reported—Las Vegas Sands (which, given its lack of Sin City presence, perhaps should be named Las Vegas Sans) and Monarch Casino.
Given how peculiarly unique each of them are, their results might not say much about the broader industry. Then again, maybe they do. Both presented bullish outlooks that may indicate that gaming is not sinking into morass, as many fear.
Let’s start with the bigger of the two: Las Vegas Sands (LVS).
LVS missed expected net earnings slightly.
But the company had a huge positive—Third quarter EBITDA at Marina Bay Sands in Singapore soared to $343 million from $15 million last year. That more than offset Macau being nearly closed and lifted overall quarterly EBITDA to $191 million from $47 million.
Further, when the Marina Bay Sands expansion is completed and Asian travel returns to normal, Singapore can produce $2 billion in EBITDA a year, CEO Rob Goldstein says. Add a reopened Macau, and $5 billion in EBITDA seems easily achievable.
Of course, there are questions: How much of Singapore business is basically a transfer of Macau players and is not new business? Will Macau completely rebound when it reopens? And, though everyone expects LVS to win a renewed Macau casino concession, investors will await the actual awarding and the details of new terms before sighing in relief.
Still, Goldstein has given a highly positive outlook and it might be fair to say that the stock has reached bottom and should rise substantially from here, though it is unlikely to return to the heady levels of several years ago.
Monarch has no such questions. Its long-time lone property in Reno continues to perform well and, as predicted in this space many times, its newly expanded Black Hawk, Colorado, casino is tearing the cover off the ball and looks like it can exceed the potential many have seen for it.
The result: A debt-free company piling up cash at an accelerating rate.
On the day after third quarter earnings were released, Monarch stock shot up 15.63 percent to $71.17. That still leaves a lot of room for appreciation given the likelihood that it will generate EBITDA approaching $10 a share after Black Hawk ramps up, and do so on no debt and with minimal maintenance cap ex.
The question now is what’s next. CEO John Farahi says he wants to find another Black Hawk to buy. But Farahi runs the publicly traded but family-controlled business just like, well, a family-controlled business —by his own lights. And he is very conservative and would be a demanding negotiator of any prospective purchase.
In other words, don’t expect a transaction soon. That means a return of capital program is likely, and it could be appreciable.
As mentioned, Las Vegas Sands and Monarch are unlike other casino companies. They don’t have properties on the Las Vegas Strip or in regional markets across the country. But that the skies ahead look blue may be a good sign for others, too.
We’ll soon know whether they are harbingers or outliers.
