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The Gaming Industry Daily Report

The Gaming Industry Daily Report for 2/13/12
Alan R. Woinski, Editor
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The DJIA rose 73 points while Nasdaq was up 28 points.  Gaming stocks were somewhat mixed.    NYNY was up 5.3%, MPEL was up 4.3% and MGAM traded up to a new high.  UWN and CZR were both down nearly 8%, CPHC was down 5%, MNTG fell 4.1% and WYNN was down nearly 3 points.
Nomura Securities said they maintained their Buy ratings on MGM and WYNN.   They met with MGM management and while they did see a deceleration of RevPAR growth in Las Vegas in the 1st quarter 2012, as expected, overall RevPAR of +5% is being driven by smaller group pricing that is less visible.  We actually believe 5% RevPAR growth is a positive.   Nomura said they expect higher VIP revenues in 2012 for MGM in Macau driving by the opening of its in-house direct VIP rooms in December and renovations on the second floor for additional VIP rooms.   As for Internet gaming, MGM is confident a federal bill could be announced in the next few months with the requirements that sites be linked to a land based casino company.   Nomura has a $16 target price on MGM.
Nomura adjusted estimates on WYNN, lowering EBITDA margins modestly for 2012 resulting in lower LV EBITDA estimates.   They made no change to their Macau EBITDA estimates and said they have a $139 price target.
Wynn Resorts disclosed that they received a letter on February 8th from the SEC asking it to preserve information about the company�s $135 million donation to the University of Macau.  As we feared, the lawsuit and allegations by Kazuo Okada has attracted the attention of the SEC and we suspect gaming regulators in Macau and Nevada are at least taking a look. WYNN also disclosed more information about the donation including that Okada was the only vote against it on the board but that he was against the length of the continuing $10 million a year donations, not against the actual donation.  There is nothing that says the SEC will be launching a formal investigation however, this is enough for us.  Given the slow growth environment WYNN has entered into pending new jurisdictions or a Cotai development approval, we believe the overhang from this investigation will keep the stock range bound until there is some resolution or a growth prospect identified.   We are moving to the sidelines and removed WYNN from our 2012 MP at $111.15.  We believe LVS, MGM and even CZR can benefit from this as investors may shift investment, just like WYNN benefited when the investigations into LVS first were disclosed.
Wells Fargo said based on month to date results in Macau, gross gaming revenue is on track for a 4% gain, much higher than what they were expecting.    WF is one of the more bearish analysts on Macau.   They believe January�s nearly 35% growth rate could have benefited from high hold, as much as 500 basis points.   They estimate the year to date revenue growth rate is 23.8% which is more than double their 11% annual revenue growth rate projection.    WF said that as of February 12th market share data is SJM - 30%, Galaxy 18%, LVS 17%, WYNN 14% and MPEL and MGM tied at 11%.   They believe MPEL and Galaxy�s February results have been affected by low hold but have improved from the first few days of the month.    SJM�s results are very strong which puts us on red alert that it is either high hold or SJM is going to spark a junket promotional war.   Right now we do not see GGR growth as a risk factor given the stronger than expected February but we are concerned that after Cotai Central opens, casino companies like SJM and Galaxy will revert to giving away the store to VIP junkets to try to maintain share.
For the same reason we are concerned about what SJM, Galaxy Entertainment, MGM and even MPEL may do after Cotai Central, enter into a promotional war, is the same reason why we are adding Asia Entertainment & Resources (AERL) to the MP at $5.80.  While AERL has been a complete disappointment, it is the only publicly traded VIP junket in Macau.   If we are correct and SJM and others start defending market share by enticing junket operators, their profitability will go up and AERL may finally rise.    We are not as aggressive as the others who are looking for the teens, we think the stock has the potential to trade up to double digits with a little luck.  
Macau Daily Times reported SJM Holdings will submit the master plan for its Cotai resort to the government as early as this week and expects the government to formally approve the land grant soon afterward.  SJM expects to invest US$2 billion in the Cotai Resort with a good portion being non-gaming.
MGM Resorts International announced CityCenter Holdings LLC and CityCenter Finance Corp. proposed to offer $240 million in aggregate principal amount of senior secured first lien notes in a private placement.  They priced the bonds to yield 5.824%.     The notes are additional of the $900 million 7.625% senior secured first lien notes due 2016 with the proceeds being used with existing cash to repay $300 million balance of its outstanding $375 million senior credit facility.  This is another opportunistic move by MGM to use the strong casino debt market to their advantage.   MGM also gave preliminary results for CityCenter showing adjusted EBITDA beating estimates by 10%.  MGM announces earnings next week and between then and now MGM China could announce a dividend and we believe there will be more refinancing announcements, all adding up to savings that the company is going to be more than happy to detail.
Genting's Resorts World Sentosa will open the last two hotels in their development on Thursday. Two eco-luxurious hotels, the Equarius Hotel and Beach Villas open on Thursday. The Equarius Hotel has 172 rooms while the Beach Villas consists of 22 units. The hotels amenities include 7 meeting rooms, an event pavilion, gym and a swimming pool. A new restaurant named Forest will also open.
The Evening Sun reported Joe Lashinger will not give up on his appeal of the PA Gaming Control Board decision to award the final resort casino license to ISLE�s Nemacolin Woodlands Resort.  Despite his own partner in the Gettysburg area casino proposal saying he is done and will not join the appeal, Lashinger continues his Supreme Court appeal.   What we don�t understand is what Lashinger hopes to accomplish even if he wins.   The locals in the area have made it quite clear they do not want a casino in the Gettysburg area, something that proved fatal to the Foxwoods casino development.  On top of that, Rep. Paul Clymer has proposed a bill to impose a 10 mile no-casino buffer zone around the Gettysburg National Military Park and Flight 93 Memorial Park.
Maryland�s Attorney General said the proposed local vote to decide whether Prince George�s County should be allowed a casino is unconstitutional.  A bill was introduced last week to seek voter approval to allow LV style table games at Maryland�s five previously authorized slots venue and to add a sixth casino in western Prince George�s County.  The Attorney General said making the state�s decision to open a casino contingent on a local vote was �constitutionally impermissible.�
The Ohio Casino Control Commission meets this Wednesday and their executive director said they expect to announce the opening dates of the first two casinos then.
In Sunday�s issue we disclosed the strange things that are going on with the Seneca tribe including two members allegedly taking part in the beating up of NY Senator Mark Grisanti and his wife.    To make things even worse, the newspapers are having a field day with the statements made by Seneca president.  His first statement was that the Seneca Nation had no formal ties to the Diabetes Foundation (the event that Grisanti had previously attended) and therefore there was no connection to the events that occurred Friday night under the Foundation�s auspices.  Three hours later he updated his statement and once again said there were no direct connection to the events but they said he spoke to the Senator to express his concern, was upset to hear what transpired at the Seneca�s Niagara Falls property and admitted it involved several individuals from the Seneca Nation.   Seneca president Robert Odawi Porter said he would hope for better behavior and conduct from everyone at such an event although it transpired sometime after the gala ended.    How does everyone know that the Seneca members told the Senator he does not support the tribe before they beat him up but the Seneca president makes a statement as if to say this was all about the Diabetes Foundation and not a simple case of angry tribal members acting like thugs?

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