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Gambling Stock Roundup: Mangkhut to Hit Macau Revenues, MGM to Buy Rocksino

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Gambling Stock Roundup: Mangkhut to Hit Macau Revenues, MGM to Buy Rocksino

Macau's gaming revenues in September are likely to be impacted Typhoon Mangkhut. MGM Resorts to buy Rocksino from MGM Growth Properties.

Last week, most stocks in the gambling industry finished in the green. While the industry rallied 1.2%, the S&P 500 index gained 1.4% in the same period.

On the news front, Penn National Gaming, Inc. PENN was given green signal by The Colorado Division of Gaming (“CDG”) for the impending buyout of Pinnacle Entertainment PNK. This apart, MGM Resorts International MGM announced that it has inked a deal with MGM Growth Properties LLC MGP. Also, Boyd Gaming Corporation BYD completed the Valley Forge Casino Resort buyout.

Recap of the Last Week’s Most Important Stories

Macau’s Gaming Revenues Likely to be Hit by Typhoon Mangkhut

Macau’s gaming revenues in September are likely to be impacted by the close of 42 casinos in the city due to Typhoon Mangkhut. Notably, ever since gambling started in 2002, this was the first time that the casinos were shutdown in Macau. Per Union Gaming Securities Asia analyst Grant Govertsen, the 33-hour shutdown is likely to have impacted Macau casinos revenues by $186 million.

MGM Resorts to Buy Rocksino From MGP

MGM Resorts announced that it has signed an agreement with MGM Growth Properties to acquire all the operating assets of Hard Rock Rocksino Northfield Park — the best-in-class gaming and entertainment destination. Per the terms of the deal, MGM Resorts will also lease the real property connected with Rocksino from a subsidiary of MGP. Located in Northfield, OH, Rocksino offers gaming, dining and entertainment facilities, and spreads across roughly 110 acres.

Moreover, MGM Resorts is supposed to pay roughly $275 million to MGM Growth Properties, under the agreement. Rocksino will be included in the existing master lease between MGM Resorts and MGP. Further, annual rent payment to MGP will increase by $60 million, 90% of which will be fixed and contractually grow 2% per year until 2022. The transaction is expected to close in the first half of 2019, subject to customary closing conditions and regulatory approvals.

In a year’s time (ending on Jun 30, 2018) Rocksino reported roughly $293 million in net revenues and $94 million in adjusted EBITDAM, thus proving its leadership in the gaming industry.

The buyout is expected to prove beneficial to MGM Resorts in terms of revenue and profit growth. Per MGM Resorts, the addition of Rocksino to MGM Resorts’ global brand portfolio will enhance its scale and operations. Additionally, it is anticipated to boost free cash flow generation. On the full integration of Rocksino, MGM Presorts expects to witness six times improved EBITDA.

MGM Resorts has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boyd Gaming Completes Valley Forge Casino Resort Buyout

Boyd Gaming announced the completion of the Valley Forge Casino Resort buyout from Valley Forge Convention Center Partners, L.P. Markedly, this is Boyd Gaming’s first property in the state of Pennsylvania. The company currently owns and operates 25 casino properties in eight states.

In fact, this Zacks Rank #3 company looks to leverage on the opportunities that opened up after Pennsylvania's approved the gaming expansion legislation recently.

Penn National & Pinnacle Deal Gets The Colorado Division of Gaming Nod

Penn National Gaming has received an approval from The Colorado Division of Gaming for the acquisition of Pinnacle Entertainment. The deal is likely to be sealed in fourth-quarter 2018. However, the company still requires additional regulatory approval.

The deal, which already received green signal from shareholders of both the companies in March, has been approved by several other gaming regulatory authorities. It is expected to yield $100 million in annual run-rate cost savings within two years of closing.

Both Penn National and Pinnacle Entertainment carry a Zacks Rank of 3.

Price Performance

The following table shows the price movement of the major gambling stocks in the past week and the last six months:

In the last five trading sessions, share price movement of most of the major gambling stocks witnessed a positive trend. Shares of Caesars Entertainment, Melco Resorts MLCO and MGM Resorts have gained the most in the same time frame.

Further, key sector participants like Pinnacle Entertainment, Penn National Gaming and Pinnacle Entertainment were the major gainers in the past six months.

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Penn National Gaming, Inc. (PENN) : Free Stock Analysis Report
 
Pinnacle Entertainment, Inc. (PNK) : Free Stock Analysis Report
 
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
 
MGM Resorts International (MGM) : Free Stock Analysis Report
 
MGM Growth Properties LLC (MGP) : Free Stock Analysis Report
 
Melco Resorts & Entertainment Limited (MLCO) : Free Stock Analysis Report
 
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