Goldman Sachs on U.S. Gaming: 3Q11 Preview: Bearish on Slots & Regionals; Bullish on Vegas & Asia

Goldman Sachs on U.S. Gaming: 3Q11 preview: bearish on slots & regionals; bullish on Vegas & Asia

Goldman analyst, Steven Kent, said, "For Ameristar (Nasdaq: ASCA) (Sell), we are forecasting 3Q2011 EBITDA (after corporate and stock comp expense) of $84 mn vs. consensus of $88.5 mn. By way of historical comparison, ASCA generated EBITDA of $89 mn in 2Q2011 and EBITDA of $77 mn in 3Q2010." (Goldman's Q3 EPS estimate is $0.59)

For Boyd Gaming (NYSE: BYD)(Neutral): "We are forecasting 3Q2011 revenues of $607 mn vs. 3Q2010 revenues of $578 mn, implying yoy growth of +1.9%. Consensus estimates put 3Q2011 revenues at $599 mn. We would note that these revenues include a 100% consolidation of the Borgata’s revenues. For the Las Vegas Locals market, we are forecasting 3Q2011 revenues of $146 mn, implying flat yoy growth. For the first two months of the quarter, revenue growth in the Locals market is trending down -0.2%." (Goldman's Q3 EPS estimate is $0.00)

For Bally Technologies (NYSE: BYI)(Neutral): "We expect BYI to deliver solid results at the start of its 2012 fiscal year. We are forecasting 1QFY12 gaming operations revenues of $85 mn vs. $79 mn in 1QFY11, implying +7.0% yoy growth. BYI recently secured two lucrative contracts with the Canadian government and Mohegan Sun, a development that serves as a testament to the progress the firm has made in the development and marketing of its gaming systems. More and more we see customers are recognizing the value of the Bally system especially relative to its peers." (Goldman's Q1 EPS estimate is $0.44)

For International Game Technology (NYSE: IGT)(Sell): "We would reiterate our heightened concern for IGT, which is reflected in our 2012 estimates. We believe current estimates for IGT are too high and unrealistic given the firm’s declining market share and continued focus on variable fee games, a mainstay amongst regional operators. At the present time, 82% of IGT’s installed base is comprised of variable fee games- a questionable strategy given that regional revenues remain weak and the outlook for regional operators against the current macro backdrop is not enticing. IGT has become increasingly focused on mobile and internet gaming, both of which do not have clear paths to fruition given the lack of legislative support...We are forecasting total company 4QFY11 revenues of $466 mn vs. 4QFY10 revenues of $496 mn, implying -6.0% yoy growth. (Goldman's Q4 EPS estimate is $0.22)

For Las Vegas Sands (NYSE: LVS)(Buy): "For LVS, we forecast 3Q2011 EBITDA (after corporate and stock comp expense) of $838 mn, in line with consensus, vs. $562 mn in 3Q2010 and $814 mn in 2Q2011. We reduce our 2011 EPS estimate modestly on more conservative expectations for Singapore. For 3Q, we forecast Las Vegas will generate property EBITDA of $80 mn. We forecast Macau property EBITDA (Macau properties comprise Sands Macau, Venetian Macau, Four Seasons Macau, and Other Asia) of $379 mn (vs. $328 mn in 3Q2010 and $381 mn in 2Q2011). In Singapore, we are forecasting 3Q property EBITDA of $438 mn based on margins of 55%." (Goldman's Q3 EPS estimate is $0.47)

For MGM Resorts International (NYSE: MGM)(Buy): "For MGM’s 3Q, we are forecasting total company revenues of $2.4 bn vs. $1.6 bn last year, implying +44% yoy growth as we now consolidate 100% of their Macau operations into the P&L. For its Las Vegas Strip properties, we are forecasting yoy revenue growth of +4.0%. We expect total EBITDA plus income from unconsolidated affiliates of $445 mn vs. $309 mn last year, implying +44.0% yoy growth due to the 100% consolidation of MGM China." (Goldman's Q3 EPS estimate is -$0.16)

For Penn National Gaming (Nasdaq: PENN)(Sell): "For PENN, we estimate 3Q EBITDA (after corporate and stock comp expenses and including income from unconsolidated affiliates) of $178 mn vs. consensus of $190 mn. Our EBITDA estimates do not include a gain of $20 mn from the sale of their JV interest in the Maryland Jockey Club." (Goldman's Q3 EPS estimate is $0.53)

For Pinnacle Entertainment (NYSE: PNK)(Sell): "On a weighted-average basis 3Q revenues (through August for Reno and PNK’s three Louisiana properties) are tracking up +6.1% yoy vs. our +4.8% estimate. For Belterra Casino Resort, revenues of +5.8% yoy are above our forecast for 0.0% revenue growth in 3Q. For L’Auberge du Lac, run rate revenues of +10.3% yoy are tracking above our forecast for +8.0% yoy growth estimate in the quarter...For PNK, we estimate 3Q EBITDA (after corporate and stock comp expenses) of $63 mn vs. consensus of $68 mn." (Goldman's Q3 EPS estimate is $0.10)

For Scientific Games (Nasdaq: SGMS)(Neutral): "In 3Q, we expect SGMS to emphasize its ongoing expansion into multiple international markets, namely China, Italy, and Germany, especially as pertains to instant tickets and lottery services. The company will also likely highlight its recent acquisition of the Barcrest Group, which served to extend SGMS’s footprint both geographically and in the interactive gaming space. We are forecasting 3Q2011 revenues of $211 mn vs. 3Q2010 revenues of $221 mn, implying -4.3% yoy growth." (Goldman's Q3 EPS estimate is $0.05)

For WMS Industries (NYSE: WMS)(Neutral): "WMS appears to be in a transitional phase with regard to product development and we are lowering our expectations for the quarter after last week’s G2E slot tradeshow. Our new 1QFY12 EPS is now $0.32 down from $0.40, which was too aggressive. In addition, our new FY2012, FY2013 and FY2014 EPS estimates are $1.72, $1.93 and $2.05 down from $1.78, $1.97 and $2.10. Our new 12-month price target is $23 down from $24 and is based on our new estimates and P/E and DCF analysis."

For Wynn Resorts (Nasdaq: WYNN)(Neutral): "For WYNN, we are expecting another solid quarter driven by strength in both Macau and Las Vegas. For the first two months of the quarter, gaming revenues in Macau grew +53.0% yoy. For 3Q, we forecast Wynn Macau property EBITDA of $302 mn (vs. $198 mn in 3Q2010 and $314 mn in 2Q2011). For Las Vegas, we forecast property EBITDA of $93 mn (vs. $77 mn in 3Q2010 and $124 mn in 2Q2011). We expect a sequential deceleration in Las Vegas EBITDA as 2Q2011 benefited from an abnormally high hold."

For WYNN "We are lowering our 12-month SOTP based price target to $150 (from $167) to reflect slower growth assumptions in the VIP segment of WYNN’s Macau business for 2012E through 2013E. We are lowering our 2011-2013E EPS estimates from $5.42, $6.01, and $6.69 to $5.12, $5.46, and $5.98."

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