Bet On It: MGM Gets One Step Closer To $10 Billion Development Plan In Japan

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Sector News

MGM Resorts (MGM) recently announced that Japan's Ministry of Land, Infrastructure, Transport and Tourism has officially certified the Area Development Plan submitted last year by Osaka Prefecture/City and by Osaka IR KK, a joint venture between MGM Resorts Japan and ORIX Corporation.

The certification is one of the final steps in the licensing process under Japan's Integrated Resort Development Act and paves the way for MGM Resorts Japan and ORIX to finalize agreements with Osaka Prefecture/City on the construction of a new approximately $10 billion development project.

Bragg Gaming (BRAG) announced that its content is now live in Italy, Europe's second largest online gaming market, with the country's local operator Microgame.

"Bragg's expansion to Italy follows its launches in several key territories including North America, the UK, the Netherlands, Greece, the Czech Republic, Germany and Switzerland. An initial batch of more than 30 popular online casino game titles distributed exclusively by Bragg are now certified for the Italian market and available to Microgame," the company stated.

Cathie Wood's ARK Investment sold 63.4 thousand shares of DraftKings (DKNG) on Tuesday and sold 347 thousand shares of the stock on Monday. 

NeoGames (NGMS) announced that it has amended its license agreement with an affiliate of Caesars Entertainment (CZR), including an initial three-year extension, followed by annual renewals unless terminated by either party. Under the revised agreement, the company will continue to provide Caesars with a sublicense to its Player Account Management system, the NeoSphere platform, and associated services, to be used by Caesars in operating its successful online sports betting and iGaming business.

In addition, the company will continue to work with Caesars to enhance the solution in support of the ongoing growth of Caesars' online business. During the term of the agreement, the company will assist Caesars in transitioning its operations from the company's platform to its own tech platform, where applicable and as requested by Caesars.

Battle for New York  

The licensing process for three full scale casinos in downstate New York began this past January. BofA estimates these properties can make New York into the second biggest commercial gaming state in the U.S., with three downstate facilities combining for at least $5 billion in annual gross gaming revenues and nearly $2 billion in total EBITDA at stabilization.

The firm anticipates the main drivers to be high population density, tourism upside, and promising initial tax rates. There are 10 groups fighting for three licenses, with investments probably ranging from $2 billion to at least $5 billion per casino. BofA told investors that licenses could be awarded by the first quarter of 2024, but facilities are unlikely to open until at least 2026.

New York reported March online sports betting results. According to Benchmark, handle for March totaled at $1.785 billion, up 22% sequentially and 9% from March 2022. Gross gaming revenue, or GGR, for the month was $162.8 million, up 50% sequentially and 42% year-over-year equivalent to a 9% monthly hold, up 7% month-over-month. March’s GGR total is a single-month record in New York.

Making the Green Mountain State Greener 

A sports betting bill in Vermont is advancing to the state Senate after a committee in the Legislature’s upper chamber approved the gaming expansion measure, Devin O'Connor of reported. A bipartisan group of representatives sponsored and introduced House Bill 127 at the end of January. The statute seeks to allow online sportsbooks to operate inside the state. Vermont currently does not have commercial or tribal casinos..

HB 127 passed the Vermont House of Representatives in March. The House version of HB 127 aimed to authorize up to six online sportsbook platforms. Betting on professional and college sports would be allowed, but wagering on Vermont-based schools would remain prohibited. 

HB 127 requires that regulated sportsbooks share 20% of their gross proceeds with the state. Senate leaders did implement a fee structure. The annual fee is determined based on the number of operators. The annual rate structure is as follows in HB 127:

  • For two operators, $412,500 per operator.
  • For three operators, $366,666 per operator.
  • For four operators, $343,750 per operator.
  • For five operators, $330,000 per operator.
  • For six operators, $320,833 per operator.

The bill now heads to the full Senate floor for consideration. The bill has not yet been scheduled for debate.

Analyst Commentary 

Exane BNP Paribas upgraded DraftKings to Neutral from Underperform with a $17 price target.

Wells Fargo raised the firm's price target on Las Vegas Sands (LVS) to $68 from $65 and maintained an Overweight rating on the shares. The firm sees a faster-than-expected recovery in Macau and likes Las Vegas Sands as a pure-play on reopening momentum in Macau and Singapore, and for having minimal U.S. consumer exposure/risk, Wells Fargo told investors in a research note.

The firm also raised the its price target on Wynn Resorts (WYNN) to $134 from $128 and reiterated an Overweight rating on the shares. Wynn Resorts is Wells Fargo's top pick, with a clear path to upward estimate revisions, the firm noted. The firm additionally contended that Q1 earnings could be a positive catalyst for Macau stocks.

JPMorgan raised the firm's price target on MGM Resorts to $55 from $54 and kept an Overweight rating on the shares ahead of Q1 results. The firm continues to see value in MGM shares and believes the company possesses an "attractive combination" of exposure to the Las Vegas Strip and Macau's recovery.

JPMorgan believes the company has a path to digital EBITDA profitability as well as a strong liquidity and capital structure position. The stock is pricing in too much negativity regarding the sustainability of strong U.S. trends and the impact of a murky macroeconomic environment, contended the firm.

Barclays raised the firm's price target on Wynn to $117 from $115 and reaffirmed an Equal Weight rating on the shares. The firm expects earnings upside and upbeat commentary exiting the Q1 for Macau exposed names.

Roth MKM initiated coverage of Las Vegas Sands with a Buy rating and $74 price target, citing a "bullish outlook on Macau." Investors are "merely focused" on a full EBITDA recovery by 2024, but Roth believes Macau is "in the early innings of a multi-year growth cycle," the firm tells investors.

On the other hand, Roth MKM backed a Sell rating and $15 price target on DraftKings ahead of its Q1 results. While earnings announcements have been "high volatility events" lately, this quarter will likely see a more muted response, the firm told investors in a research note.

Roth MKM adds that entering the seasonally slow months of the year, the biggest driver will be new state launches, and the firm believes that disappointing legislation may weigh on DraftKings shares ahead of revenue slowing in 2024.

Susquehanna lowered the firm's price target on Penn Entertainment (PENN) to $42 from $44 and stayed with a Positive rating on the shares. The firm said its competitive impacts are lower and intra-Q1 trends are stronger despite the overhang from a now higher risk of a consumer slowdown.

Lastly, Credit Suisse initiated coverage of Flutter Entertainment (PDYPY) with an Outperform rating. A "structurally growing" online gambling industry bodes well for near-term industry investor sentiment,  Credit Suisse told investors in a research note. Flutter is the firm's top pick given its "strong momentum" in the "high-multiple" U.S. market.

Publicly traded companies in the space include: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars, Churchill Downs (CHDN), DraftKings, Flutter Entertainment, Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands, MGM Resorts, Penn Entertainment, Rush Street Interactive (RSI), Super Group (SGHC), and Wynn Resorts.

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