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Gaming analyst touts growth opportunities in Las Vegas

Noting “the fundamental strength across Las Vegas,” a gaming industry analyst whose company conducted an investment conference this week says near-term industry trends are positive with no evidence of consumer weakness.

Equity analyst David Katz of New York-based Jefferies identified Caesars Entertainment Inc., real estate investment trust Vici Properties Inc., DraftKings Inc. and Churchill Downs Inc. as prime for growth in a Thursday report to investors.

Katz also noted solid opportunities for Bally’s Corp., the operator of the Tropicana, real estate investment trust Gaming & Leisure Properties Inc., which owns the Tropicana land, and manufacturing companies IGT, Light & Wonder and Everi Holdings Inc.

“Among the most prominent aspects of our discussions, the fundamental strength across Las Vegas and digital gaming is notable, with more mixed, specific dynamics in regional gaming,” Katz said in his note to investors.

“The more important takes in our view are: the nascent growth in digital gaming coupled with active mergers and acquisitions, the specific growth opportunities in gaming in Las Vegas for Caesars and Bally’s, and Churchill Downs in new regional markets, and the mergers and acquisitions landscape for IGT and its gaming business, and how this could read across for Everi and Light & Wonder.”

Katz said Bally’s is noteworthy in the long term with future plans involving the Tropicana and an agreement with the Oakland Athletics Major League Baseball team seeking to relocate to Las Vegas and build a $1.5 billion, 30,000-seat retractable-roof stadium at the Trop site.

But in the early term, Bally’s is focused on opening a temporary casino operation in Chicago. Bally’s was the successful bidder in a competitive process in Chicago and has received permission to build a $1.8 billion resort that would be the first new casino resort ever built within a major metropolitan area.

The temporary facility is due to open in late August or early September and operate for three years with the permanent casino planned to open in 2026. The property will have 500 hotel rooms, a casino with 3,400 slot machines and 173 table games, a food hall and six restaurants, a theater and event space, a museum and an exhibition area.

The more than 10 acres of outdoor space includes a community park that could host art fairs and farmers markets.

Bally’s agreement with the city of Chicago will allow the company to place slot machines in the city’s two major airports, O’Hare and Midway international.

In his analysis of Caesars Entertainment, Katz noted Las Vegas special events that should drive higher room rates.

“The runway for Las Vegas is extremely positive through Super Bowl 2024, with Caesars Palace rooms 75 percent booked at $750-$2,000 a night; segment should be $500 million cash flow per quarter going forward,” he said.

The positive outlook of the casino industry bodes well for real estate investment trusts and gaming manufacturers.

Vici Properties is affiliated with Caesars properties and Gaming & Leisure Properties, teamed with Bally’s at the Tropicana, also is in negotiation with the Oakland A’s and could become the first stadium property engaged in a lease agreement with a REIT.

Las Vegas-based Light & Wonder has repositioned its gaming operations business by shedding its lottery and sports-wagering divisions. Katz said the company’s digital gaming drivers are gaining traction by cross-selling content from its land-based operations.

In addition, the company is gaining share in Australia, where Light & Wonder has joined the Australia Securities Exchange.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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