Penn National hits Vegas stride

Penn National hits Vegas stride

Monday, March 27, 2017 Posted by Scott Longley
Omni-channel efforts help juice Tropicana revenues

The upbeat first-quarter results statement from regional-to-Nevada casino operator Penn National could be a signal of the further opportunities for the company to expand operations in Las Vegas, according to analysts.

Penn National surprised the market late last week when it announced it was raising its guidance for revenues in the first quarter of this year to between $770m and $771m which it said reflected strong broad-based property outperformance. Adjusted EBITDA is now expected to come in at between $222m and $223m. This compares with previous estimates for the two metrics of $761m and $209m respectively.

The revision caused a pop in the share price which rose 11 percent on the day of the announcement last Thursday.

Timothy Wilmott, Penn National’s president and chief executive officer, said the company’s efforts to optimise operating efficiencies meant it had been able to improve margins while its omni-channel efforts to combine retail and social gaming meant it had also increased cash flows and reduced leverage.

Penn National bought the social gaming operator Rocket Gaming in August last year for $60m. The Rocket portfolio includes popular social gaming hits such as Viva Slots Las Vegas and Downtown Deluxe Slots.

Analysts at Union Gaming noted the Tropicana in Las Vegas (which Penn National bought in April 2015 for $360m) had performed particularly well. Though cautioning that the drivers for the revenue increase – including the benefit from the city’s convention calendar leading to higher room rates and incremental visitation – they added the solid first quarter at the property “would be reason to get incrementally more excited about the ramp as it would further prove the longer-term opportunity for Penn in Las Vegas,” they wrote in a note to clients.

Regionally, Union Gaming noted that the Hollywood Charles Town in Maryland is performing better than expected despite new competition from MGM National Harbour. In the quarter-to-date, they estimate that gross gaming revenue (GGR) at the property is down around 11 percent, led by an estimated large drop-off in table revenues of 38 percent but stable slot trends. They added that the company was believed to have expected a 20 percent decline overall.

“We are encouraged at the resilience early on, we would caution that competitive pressure could pick up as MGM continues to ramp,” they added. “That said, we have slightly increased our estimates at Charles Town. We are now forecasting a 12-13 percent EBITDA impact versus 15 percent previously.”

Totally Gaming says: We will have to await the full first-quarter results statement in the coming weeks to understand more fully what have been the drivers behind Penn’s decent performance. Particularly interesting, though, will be what the company says about how it is leveraging its social gaming unit to greater effect in Las Vegas and elsewhere.

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