Macau’s 13 Hotel Quietly Reopens After Sale Flounders

The 13 Hotel in Macau has reopened in a limited capacity after the resort’s parent company failed to find a buyer for the $1.6 billion financial catastrophe.

The 13 Hotel Macau casino South Shore Holdings
The 13 Hotel in Macau. The resort designed for high-end travelers reopened recently after sitting closed for more than four years. (Image: Ticati)

TDM Radio Macau broke the news that The 13 recently reopened a portion of its 199-room boutique hotel, though how many rooms are online wasn’t immediately known.

The local public broadcaster said the resort’s parent company, South Shore Holdings Limited, is embarking on an extensive renovation of the property that includes room makeovers.

The Macau Government Tourism Office (MGTO), which regulates casino hotel operations and monitors room inventory across the enclave, confirmed that The 13 Hotel had reopened for the first time since it shuttered during the COVID-19 pandemic in February 2020.

The 13 Saga 

The 13 is the failed ultra-luxury casino resort envisioned by Hong Kong billionaire Stephen Hung. The flamboyant playboy businessman came up with the idea for a grand, VIP-only boutique casino resort in 2013 at the height of the Macau casino industry when the six gaming licensees combined to win $45 billion from players.

Beijing’s orders for Macau to more closely monitor the flow of cash from the mainland through its Special Administrative Region (SAR) border gates resulted in annual gross gaming revenue declining in each of the next three years. Despite more competition for high rollers with further expansion of the luxurious Cotai Strip where VIPs stay, Hung and his South Shore Holdings pressed on to build the 22-story resort that features a red façade and faux giant diamond.

Concerns about whether VIPs would be willing to stay over a mile south of the southern end of the Cotai Strip in Coloane, an area where few other amenities exist for a high roller, prompted Hung to purchase 30 custom Rolls-Royce Phantom cars for $20 million. The largest single order in the automobile company’s rich history were to whisk The 13’s guests around town.

High rollers never came.

Soon after opening in September 2018 as a nongaming hotel after Hung failed to attract one of the six casino operators to partner for a casino operation, The 13 reported dismal bookings. The resort averaged just an 8% occupancy rate during its first 12 months in business.

Funding Sources

TDM Radio Macau relayed that The 13 staff said the resort’s available rooms are “fully booked” through late September. Rooms can only be booked by calling the resort directly.  

In March, South Shore Holdings announced it was shopping The 13. Commercial real estate firm Jones Lang LaSalle auctioned the property on South Shore’s behalf with an assessed value of HK$2.4 billion (US$310 million). The auction, however, didn’t result in a sale.

South Shore has remained insolvent for several years despite Hung selling off other interests he had controlled. Hung sold a nearly 52% stake in Paul Y. Engineering and used the proceeds to keep South Shore afloat. But, the Hong Kong Stock Exchange removed South Shore shares from its exchange in February 2023 after the stock went to a penny.

It’s unclear how South Shore is funding The 13’s resort renovation. The hotel has an active occupancy license from the MGTO that runs through the end of the year.

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Casino REIT Stocks Could Improve as Interest Rates Stabilize

Shares of VICI Properties (NYSE: VICI), and Gaming and Leisure Properties (NASDAQ: GLPI), the two largest casino landlords, are off an average of 11.27% year to date while the S&P 500 is higher by 16.69%. But, some analysts believe gaming real estate investment trusts (REITs) could soon deliver better performances.

Harrah’s on the Las Vegas Strip. Owner VICI Properties and rival Gaming and Leisure Properties earned praise from Truist Securities analyst Barry Jonas. (Image: Reno Gazette-Journal)

In a recent note to clients, Truist Securities analyst Barry Jonas cited the familiar headwind of elevated interest rates as one of the primary drags on VICI’s and GLPI’s price action through the first half of 2024. Due to its capital-intensive nature, real estate is one of the sectors most negatively correlated to interest rates, and with the Federal Reserve yet to lower borrowing costs, REITs of all stripes have been pinched.

Year to date, 10-year Treasury yields are higher by 11.17%, weighing on the real estate sector in the process, but those yields slightly declined over the past 90 days. That could be a sign of the rate stability Jonas mentioned as a possible catalyst for the casino REITs.

(VICI is) well positioned for the next wave of large scale, non-gaming, and/or international transactions,” wrote Jonas.

The analyst is also constructive on Gaming and Leisure, which is smaller than its rival and needs “less to move the needle,” he observed.

High Rates Not Slowing Casino REIT Activity

While the highest interest rates in two decades are weighing on shares of casino REITs, the companies aren’t sitting idly by. Rather, both GLPI and VICI are executing transactions that could be accretive to long-term investors.

In February, GLPI said it would pay $175 million for the property assets of Tioga Downs Casino Resort in Nichols, NY. The acquisition jibes with GLPI’s track record of adding casino real estate in less volatile markets and areas where the acquired venue faces little nearby competition.

Jonas said that transaction and other bolt-on buys by GLPI are “indicative of smaller deals that are still getting done despite the lack of rate cuts so far this year” while that REIT and rival VICI are “demonstrating execution ability despite the lingering interest-rate uncertainty.”

For its part, VICI has been lauded by Wall Street for its involvement in financing $1 billion in upgrades at the Venetian and Palazzo on the Las Vegas Strip. As part of the financing accord, VICI will increase Apollo’s lease obligations at Venetian. Under the existing rental agreement, rent will rise “on the first day of the quarter immediately following each capital funding at a 7.25% yield.”

Eye on Potential Penn Sale

Amid frequent, though unconfirmed, scuttlebutt that Penn Entertainment (NASDAQ: PENN) is a takeover target, both casino REITs could be worth monitoring, but such a deal would be impactful for GLPI because the regional casino operator is the landlord’s biggest tenant.

Jonas, who isn’t convinced Boyd Gaming (NYSE: BYD) will make a play for Penn, observed GLPI will have a say in any such transaction should it materialize.

“GLPI’s master lease with PENN has change-of-control provisions that set various conditions for an acquirer and could require GLPI’s approval for any divestitures/lease modifications,” concluded the analyst.

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Caesars Boosts Sports Betting Tech with ZeroFlucs Acquisition

In a move aimed at bolstering its sportsbook technology, Caesars Entertainment (NASDAQ: CZR) said today it is acquiring ZeroFlucs Group Pty Ltd.

Caesars hedge funds
Visitors entering Caesars Palace Las Vegas. The operator is acquiring ZeroFlucs to add to its sports betting tech stack. (Image: David Paul Morris/Bloomberg)

The Australian company is a software provider whose products allow sportsbook operators to efficiently update odds and pricing while maintaining existing data relationships. Financial terms of the transaction were not disclosed.

The ZeroFlucs acquisition follows a successful integration of ZeroFlucs’ technology into the Caesars Sportsbook platform through a commercial arrangement that enabled the recent launch of new products, such as in-play same-game parlays (SGPs) and a vastly improved menu of ‘SGP-eligible’ markets for Major League Baseball,” according to a statement.

Caesars did not say when the transaction will close, but the buyer noted Steve Gray and Carly Christensen will remain at the helm of ZeroFlucs with Christensen joining Caesars Digital as senior vice president of price technology.

Sports Betting Tech Race Heating Up

The Caesars deal for ZeroFlucs is the latest sign of an intensifying race for sports wagering technology.

The transaction was announced less than two weeks after MGM Resorts International (NYSE: MGM) said its LeoVegas unit would purchase the US iGaming and sportsbook operations of Tipico Group for an undisclosed sum — a move market observers believe is largely rooted in technology.

With live betting and SGPs prime avenues through which sportsbook operators can increase hold and profits, shoring up tech stacks becomes an essential objective because many bettors that are enticed by these long odds wagers will make decisions on where to place those bets based on operators’ tech offerings.

Regarding ZeroFlucs, “the acquisition cements a relationship between the companies that has already improved the customer experience and will continue to unlock exciting new product features and benefits for Caesars Sportsbook bettor,” added Caesars in the press release.

How ZeroFlucs Can Help Caesars

As technology further penetrates the world of sports wagering, speed is essential in boosting the menu of live wagers a sportsbook operator can offer bettors.

In nearly all major team sports, in-game odds can shift on a play-by-play basis — a touchdown, a home run, etc. Sluggish technology can force operators to only refresh odds during breaks in the action, but wise bettors know they might not be getting the best odds.

Specific to ZeroFlucs and Caesars, the acquired company’s competencies in baseball SGPs could be enticing because due to the slow-moving nature of that sport, it’s conducive to SGPs and live wagering. That fact isn’t lost on gaming companies and with better technology, it’s possible operators will lure more bets on baseball — a sport that trails football and basketball by handle by wide margins.

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Penn Pops on Rumor of Flutter Joining Boyd in Takeover Bid

On a mixed day for gaming stocks, Penn Entertainment (NASDAQ: PENN) rallied 4.70% on a report that Flutter Entertainment (NYSE: FLUT) is considering joining Boyd Gaming (NYSE: BYD) in a takeover bid for the regional casino operator.

Flutter FOX Bet
The Flutter logo as seen in an investor deck. Reports surfaced that the gaming company could join Boyd Gaming in pursuit of Penn Entertainment. (Image: Flutter Entertainment)

Boyd’s purported pursuit of Penn, which has not been publicly confirmed by either side, is several weeks old, but news of Flutter potentially being involved is new and was initially delivered earlier today by TheDeal. Citing unidentified sources, the outlet reportd Flutter, the parent of FanDuel, could partner with Boyd, acting as a buyer of Penn’s digital assets, including ESPN Bet.

That speculation surfaced less than three weeks after reports emerged that Boyd was mulling a bid of at least $9 billion for rival Penn. There is some logic in the possible inclusion of Flutter because Boyd has a long-standing relationship with the Irish gaming company. The Las Vegas-based regional casino operator owns 5% of FanDuel.

How Flutter Could Help Boyd Execute Penn Deal

Rumors regarding Boyd’s potential interest in Penn are close to a month old and over that time, analysts have consistently rejected the notions that Penn is a willing seller and that Boyd could easily execute a $9 billion or larger transaction.

Some analysts have noted that one hurdle in a Boyd takeover of Penn is that the suitor wouldn’t want to pay up for ESPN Bet, meaning a third party would have to get involved to buy Penn’s interactive unit. Should that party emerge and potentially offer Penn at least $500 million for its digital gaming arm, that would reduce the per share price Boyd would need to offer to get Penn to come to the bargaining table.

Translation: Boyd might want Penn’s land-based casino assets, but it probably doesn’t want ESPN Bet and related pieces. Flutter could have use for those entities.

ESPN Bet has roughly 6% market share in online sports betting and under the Hollywood Casino brand, Penn has resources to make waves in iGaming. Those could be appealing traits to Flutter.

Flutter Could Help, Not Solve All Issues in Possible Boyd/Penn Deal

Flutter buying Penn’s interactive business would serve the objective of lowering the price for the regional casino operator, thus making a bid more palatable for Boyd, but that’s just one hurdle.

Even with ESPN Bet and Hollywood Casino out of the way, a Boyd acquisition of Penn would likely be slow to reach the finish line because of regulatory complexities. The two companies operate regional casinos in many of the same states. By some estimates, at least 10 states’ gaming regulators and the Federal Trade Commission (FTC) would have to approve the deal.

That implies that before Boyd and Penn could sign on the dotted lines, one or both would likely have to commit to asset sales in certain states — mainly in the Midwest and the South. Asset sales could be difficult to execute over the near-term due to high interest rates and restrained consumer spending in some regional gaming markets.

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DraftKings Rumored to Be Mulling VSiN Sale in Barstool/Penn-Style Deal

DraftKings (NASDAQ: DKNG) is rumored to be considering the sale of the Vegas Sports Information Network (VSiN), the Las Vegas-based sports wagering radio network it acquired for $70 million in March 2021.

VSiN New Hampshire
Brent Musburger promoting sports betting network VSiN. DraftKings may be considering a sale of the radio network. (Image: VSiN)

Eilers & Krejcik Gaming (EKG) noted the online sportsbook operator is close to divesting VSiN and it could be for pennies on the dollar in a transaction some are comparing to Penn Entertainment (NASDAQ: PENN) dumping Barstool Sports last year to founder Dave Portnoy for just $1.

EKG observed that the likely buyer is VSiN founder and veteran broadcaster Brent Musburger. VSiN was founded in 2017 and much of the network’s radio shows are recorded at Circa Sportsbook and The D Hotel in downtown Las Vegas.

VSiN’s content includes 18 hours a day of sports wagering coverage, and the company has a 24/7 stream. It has dedicated channels on iHeartRadio and TuneIn, as well as smaller radio stations across the US. The company’s offerings are also available on several linear television platforms and streaming services, such as fuboTV and Sling TV.

DraftKings VSiN Underscores Difficult in Media Deals

Neither DraftKings nor VSiN has publicly commented on the possibility of a transaction, but should a sale come to light, it would underscore the difficulty gaming companies have found in wringing adequate profits from the media relationships they were previously so bullish on.

When DraftKings acquired the sports betting radio network in 2021, the $70 million it paid was viewed as substantial at the time, but a credible investment because industry observers speculated the  intersection of media and sports wagering companies was a combination that would eventually drive $30 billion (including iGaming) in revenue by 2030.

The realities have proven much different as highlighted by Penn unloading Barstool for a mere $1 and other ill-fated examples of sports betting/media company relationships prove “that media companies don’t necessarily make good betting companies,” according to EKG.

Interestingly, Barstool signed a marketing deal with DraftKings earlier this year.

How VSiN Could Look as Fresh Standalone Entity

Should DraftKings ultimately sell VSiN, there would likely be changes at the radio network, though more from a marketing relationship. Although the bulk of VSiN shows are broadcast from Las Vegas, on-air talent mostly cite DraftKings odds despite the fact that the operator doesn’t offer betting in the state.

If it’s sold by DraftKings, VSiN would likely find a new odds provider — potentially Circa — because the network has ample brand equity in the betting community and Musburger is well-known to bettors and fans alike.

VSiN, The Sports Betting Network, is the first sports media company dedicated to providing news, analysis and proprietary data to the millions of Americans who wager on sports and make sports betting a multibillion-dollar industry,” according to the media company.

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Okada Manila Owner Folds on Acquiring Stalled Emerald Bay in Philippines’ Cebu

The parent company of Okada Manila in the Philippines’ Entertainment City revealed Tuesday it will no longer pursue acquiring the stalled project in Cebu called Emerald Bay.

Okada Manila Philippines Emerald Bay
PH Resorts’ Emerald Bay remains unfinished on Mactan Island in the Philippines. The casino resort lost a buyer this week with Okada Manila’s parent organization bowing out of the takeover talks. (Image: PH Resorts)

In a statement from Tiger Resort, Leisure and Entertainment, Inc. (TRLEI), the company said it informed PH Resorts Group that it’s terminating its plans to acquire the Cebu integrated resort. TRLEI reps said the tentative takeover agreement reached in December is formally off the table.

On July 1, 2024, TRLEI notified PH Resorts of the termination of the Term Sheet as certain Closing Conditions under the Term Sheet are not or cannot be fulfilled. Due to confidentiality obligations, the Company does not provide specific details of this matter,” the TRLEI release read.

When TRLEI reached the December 2023 deal to acquire the partially finished integrated resort, the company said it would bring it to completion by 2026. The resort is to feature two 15-story hotel towers with 642 guestrooms, 18 bars and restaurants, retail shopping, conference space, and a casino floor with 700 slot machines and 140 live dealer table games. 

Not the First Time Emerald Bay Lost a Buyer

Emerald Bay was first floated by PH Resorts, a subsidiary of the Udenna Corporation, in 2017. Udenna is the conglomerate of Philippines businessman Dennis Uy.

Uy, worth an estimated $440 million by Forbes, inherited his father’s oil and gas company, Phoenix Petroleum. He used his family’s riches to establish Udenna in 2002. The firm has investments in lubricants, shipping and logistics, construction, hospitality, and gaming.

Udenna’s resort arm, PH Resorts, has just one property. The Donatela Resort & Sanctuary is located on Bohol Island and offers 12 villas.

Uy envisioned Emerald Bay as PH Resorts’ flagship development and “the crown jewel of Philippines resorts.” More than six years after announcing the project, Emerald Bay sits unfinished on its six-acre prime beachfront lot in Cebu’s Punta Engano.

TRLEI isn’t the first company to pull out of takeover talks for Emerald Bay. In March 2023, Bloomberry Resorts, which owns and operates Solaire in Manila’s Entertainment City, rescinded its plans to acquire Emerald Bay.

Bloomberry was also vague in its decision to fold on the Cebu resort.  

“The Company has decided to terminate the Term Sheet … after considering the results of due diligence,” a Bloomberry investor notice read.

Emerald Future Unknown 

It’s unclear whether Uy and PH Resorts will move forward in completing Emerald Bay. PH reported an annual operating loss of PHP1.81 billion (US$31 million) last year.

A publicly traded company on the Philippine Stock Exchange, PH Resorts officials said during the company’s earnings call earlier this year that the firm is amid a fundraising initiative. But executives conceded that PH is facing “material uncertainty” that casts doubt on its ability to raise capital, either through stock sales or financial loans.

PH’s primary lender since its inception has been China Banking Group. China’s six state-owned banks were downgraded by Fitch Ratings in April. Fitch reasoned that China’s slowing economy could result in the banks not being as financially supported by Beijing as they have been in the past.

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BlueBet Departing Indiana, US Strategic Review Ongoing

Australian sportsbook operator BlueBet announced on Monday that it’s withdrawing from Indiana to focus its attention on other states. The gaming company also reminded investors that a strategic review of its US operations is ongoing.

An image from a BlueBet commercial. The company is leaving the Indiana sports betting market and continuing a strategic review of its US operations. (Image: YouTube)

BlueBet gained access to the Indiana sports betting market via an agreement with Horseshoe Hammond, a casino operated by Caesars Entertainment. The Aussie company terminated that pact effective June 30, but noted that termination was mutual.

BlueBet, which was founded in 2015 and went public in Sydney in 2021, said it will focus on its sports wagering operations in Colorado, Iowa, and Louisiana, as well as “continuing to roll out its business-to-business (B2B) Sportsbook-as-a-Solution (SaaS) offer.”

In Colorado, Iowa, and Louisiana, BlueBet has exposure to some of the fastest-growing sports betting states in the US without the expenses required to operate in major markets, such as New York or Pennsylvania.

BlueBet Still Sees Opportunity in US

As more states authorize mobile sports betting, market share has increasingly consolidated around just two operators, FanDuel and DraftKings.

That’s made it difficult for smaller players such as BlueBet to gain adequate market share, and that could be one reason why the operator commenced the strategic review. In the statement announcing the Indiana departure, the gaming company didn’t provide details on the strategic review except to say it is ongoing.

BlueBet remains committed to maximising value for shareholders. The Company believes focusing its efforts and capital on its outperforming Australian business, while continuing to scale in the US with its ‘Capital Lite’ market entry strategy, will deliver the best returns on capital,” according to the statement.

Signaling it remains committed to the US market, BlueBet said it inked a B2B deal in Ohio in March. The operator believes such agreements can reduce its sportsbook operating expenses in this country.

BlueBet Not the First Aussie Operator to Find US Difficult

BlueBet isn’t the first Australian bookmaker that’s found it difficult to replicate the success found in its home country in the US. For example, PointsBet sold PointsBet US to Fanatics last year for $225 million after that unit struggled to gain noticeable market share in this country and had become a drag on the parent company’s financials.

Both BlueBet and PointsBet have solid sports wagering operations in Australia, which is one of the most mature sports wagering markets in the world. It’s a jurisdiction in which gaming industry consolidation rumors are persistent, but there, BlueBet might be a buyer, not a target.

Here in the US, BlueBet’s strategic review could be a sign the parent is willing to sell, but rumors regarding potential buyers haven’t surfaced.

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VICI Clings to Investment-Grade Rating with Stable Outlook at Fitch

Fitch Ratings reaffirmed VICI Properties’ (NYSE: VICI) credit grade at “BBB-“ with a “stable” outlook in a report out Thursday.

Caesars asset sale
Caesars Palace on the Las Vegas Strip. Owner VICI Properties retained an investment-grade credit rating at Fitch Ratings. (Image: CNN)

The research firm said the rating — the lowest on the investment-grade spectrum — is supported by VICI’s status as one of the largest domestic real estate investment trusts (REITs) by enterprise value, earnings before interest, taxes, depreciation, and amortization (EBTIDA) capabilities, and its ability to access capital. VICI is the largest owner of gaming real estate.

The ratings also incorporate the company’s stable occupancy and ownership of large, strategic assets with regulatory barriers to access and contractual protections, as well as material tenant concentration with high-yield counterparties and potentially weaker contingent liquidity compared to other more traditional commercial real estate (CRE) property types,” noted Fitch.

New York-based VICI owns the property assets of iconic Las Vegas Strip casino hotels such as Caesars Palace and the Venetian, among others.

VICI Focusing on Deleveraging

One of the reasons VICI shares slid 7.58% over the past year and are lower by 10.13% year-to-date is because the operator took on more leverage at a time when interest rates are high. Alone, high borrowing costs weigh on REITs, but when more debt is factored into the situation, it can be a significant headwind, but VICI is working to delever.

Much of the landlord’s recent debut accumulation stems from the $17.2 billion acquisition of rival MGM Growth Properties in 2022. With that deal, VICI added Excalibur, Luxor, Mandalay Bay, MGM Grand, Mirage, New York New York, and Park MGM, as well as various regional casinos operated by MGM Resorts International (NYSE:MGM) to its portfolio.

“VICI’s leverage has returned to its long-term financial policy (5.0x-5.5x net debt/operating EBITDA) on an MRQ basis with MRQ annualized REIT leverage of 5.4x as of March 31, 2024. Leverage was elevated in 2022-2023 as a result of its merger with MGM Growth Properties (MGP) and its acquisition of minority interests in the MGM Grand/Mandalay Bay joint venture,” added Fitch.

The research firm believes the REIT will drive leverage below 5.5x by the end of this year. Fitch added that non-traditional owners, including private equity firms, gobbling up Las Vegas Strip real estate is compressing cap rates, thus bringing a potential long-term positive catalyst forth for VICI.

Watch for Indiana Transactions

As was reported here earlier this week, it’s possible VICI will soon provide an update on its outlook for Centaur Holdings — the holding company of Harrah’s Hoosier Park and Horseshoe Indianapolis, both of which are operated by Caesars Entertainment (NYSE: CZR).

By way of Eldordado Resorts’ 2020 acquisition of Caesars, Eldorado and VICI reached an agreement under which the gaming company could put those properties to the REIT or the landlord could call them away by the end of this year. Caesars has previously indicated it’s not planning to use its put rights, but VICI could decide to use its call rights, which could lead to higher-leverage over the near-term.

“Were either party to exercise its rights, the ensuing transaction would represent material capital allocation for VICI. Depending on the company’s funding mix for the transaction, leverage could be elevated in the near term, though we expect the company would be able to manage leverage within its sensitivities within a reasonable amount of time post-acquisition,” concludes Fitch.

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Penn Downgraded as Analyst Sees Little Hope of Near-Term Sale

Shares of Penn Entertainment (NASDAQ: PENN) slumped Tuesday after an analyst downgraded the stock, in part citing long odds that the regional casino operator sells itself over the near term.

ESPN Bet Penn Entertainment sports betting
The ESPN Bet logo. Operator Penn Entertainment probably won’t sell itself over the near term. (Image: ESPN Bet)

In a note to clients on Tuesday, Raymond James RJ Milligan lowered Penn to “market perform” from “outperform” while setting a price target of $20 on the stock. That implies upside of about 8.1% from where the shares trade at this writing.

Given the path to profitability in digital still remains uncertain, and we don’t expect any dramatic shift in strategy (e.g., an outright sale of the company) in the near-term, we are recommending investors take profits and look for better risk-adjusted opportunities in the sector,” wrote Milligan.

The analyst’s commentary arrived just days after reports surfaced indicating that Boyd Gaming (NYSE: BYD) may be considering a takeover bid of more than $9 billion for Penn. Shares of Penn have rallied since late May when the Donerail Group, a major investor in the gaming company, sent a letter to the board of directors pushing for a sail.

Penn Waiting on ESPN Bet Football Uptick

In the wake of the Boyd rumor, the prevailing consensus among sell-side analysts is that it’s not surprising the Orleans operator might be interested in rival Penn, but that getting a deal completed is easier said than done.

Multiple reasons fortify that thesis, including Penn not yet signaling it’s open to a sale. Analysts believe the company might consider divesting some regional casinos, but a transaction for Penn in its entirety probably isn’t the near-term cards.

Additionally, Penn is viewed as wanting to evaluate the performance of its ESPN Bet mobile sports wagering application over a full football season — an opportunity presenting itself this year. The app debuted last November.

Among others, those moving parts are among the reasons Milligan encouraged clients to take profits in Penn and look for better risk-adjusted opportunities in the gaming space. Caesars Entertainment (NASDAQ: CZR) is Raymond James’ top pick.

ESPN Bet Could Loom Large in Deal for Penn

Penn’s commitment to ESPN Bet, which was heavily criticized by Donerail, could be a significant factor in a large-scale transaction and, potentially, the company’s ultimate decision to sell itself or continue as an independent entity.

Specific to Boyd, some analysts believe that owing to that operator’s 5% stake in FanDuel — the largest online sportsbook in the US — it would have no interest in ESPN Bet and would likely want Penn to find another buyer for that unit as part of a possible agreement to acquire the company’s land-based casinos.

Locating an acquirer for ESPN Bet could also be easier said than done due to Penn’s relationship with ESPN parent Walt Disney (NYSE: DIS) and ESPN Bet’s currently modest market share.

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VICI Properties Gets Analyst Nod Ahead of Earnings Update

Shares of VICI Properties (NYSE: VICI) rallied Monday after Jefferies analyst David Katz reiterated a bullish view on the real estate investment trust (REIT) ahead of its second-quarter earnings report.

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Venetian Las Vegas. An analyst waxed bullish on owner VICI Properties on Monday. (Image: Vegas Means Business)

Katz said he and his team updated their models on VICI to reflect rent escalations at Caesars Palace on the Las Vegas Strip, as well as rental income at the Venetian tied to the $700 million in financing the landlord is extending to operator Apollo Global Management (NYSE: APO) to enhance the venue. Jefferies now expects VICI to post 2025 revenue of $3.98 billion.

We are valuing the company on the same blended multiples on 2024/2025 of 18x enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA), 19x price/acquired funds from operations (AFFO), and 16x price/free cash flow, which are peer-level multiples vs. triple net REITs with longer track records, absent the growth and future outlook of VICI. As the company diversifies its tenant base and pursues accretive deals, we expect the gap to continue compressing over time,” observed Katz.

Katz reiterated a $43 price target on the REIT, implying upside of 53% from the June 21 close. VICI’s estimated second-quarter earnings date is July 24.

VICI Could Provide Update on Caesars’ Indiana Options

Katz also told clients that VICI could use the second-quarter earnings report to update investors on the possibility of exercising its call option to acquire Caesars Entertainment’s (NASDAQ: CZR) Centaur Holdings, the holding company of Harrah’s Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.

When Eldorado Resorts announced its $17.3 billion takeover offer for the “old Caesars” in June 2019, it struck an agreement with VICI whereby the gaming company could sell or the REIT could acquire those assets between Jan. 1, 2022, and Dec. 31, 2024.

With Caesars looking to reduce outstanding debt and management previously hinting at selling assets it views as noncore, there has been some speculation that this could be in the year in which VICI acquires the real estate assets of those venues or Caesars puts those properties to the REIT.

Harrah’s Hoosier Park and Horseshoe Indianapolis, which are two of the operator’s four Indiana casinos, joined the old Caesars by way of that company’s $1.7 billion purchase of Centaur Holdings in November 2017. The company’s other Indiana properties are Horseshoe Hammond and Caesars Southern Indiana. Caesars and MGM Resorts International (NYSE: MGM) are VICI’s two largest tenants.

VICI Could Discuss Other Opportunities

Beyond the possibility of VICI telling analysts and investors what it plans for Centaur Holdings, Katz noted the REIT could also provide updates on its nongaming activities, including its relationship with bowling alley operator Bowlero and the Kansas City sports center.

Katz also expects that VICI will update market participants on acquisition plans in the gaming and experiential spaces, as well as the possibility of more financing deals comparable to the Venetian emerging.

Owing to the interest rate sensitivity of the real estate sector, it’s possible VICI management will also comment on its rate outlook on the earnings call.

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