Credit Suisse says the worst is over in Macau, MGM has the biggest growth option

TAGs: Cotai, credit suisse, Eldorado Resorts, Gary Carano, Kenneth Fong, Macau, MGM Resorts, Reno Casino

Credit Suisse says the worst is over in Macau, MGM has the biggest growth optionIn a report published on Tuesday, Credit Suisse analyst Kenneth Fong said that the “worst is over” for the Macau gaming sector, and it is now time for investors to accumulate shares.

Fong also stated that investors should begin focusing on the Cotai growth option, particularly MGM Resorts International, Las Vegas Sands Corp. and Wynn Resorts.

“We believe that the worst is over for the sector, given the negatives are well-known, the sector is under-owned, we see a fundamental shift towards supportive policy (from both Macau and the central government), and seasonally stronger moths are ahead,” Fong wrote. “We see attractive risk-reward here as the potential downside is somehow supported by government policy, and the upside from an industry recovery and new projects is not fully priced in.”

MGM sells Reno casinos for $72.5m

Meanwhile, MGM has sold its two Reno casinos — Silver Legacy Resort Casino and Circus Circus Reno – to Eldorado Resorts, Inc.

Eldorado and MGM Resorts announced on Tuesday that they have entered into a definitive agreement for Eldorado to acquire MGM’s 50% interest in the Silver Legacy Resort Casino Reno, as well as all of the assets of Circus Circus Reno, for total of $72.5m cash, subject to a working capital adjustment.

Eldorado Resorts owned the other half of the Silver Legacy and is expected to repay the property’s credit facility, of which approximately $60 million was outstanding at March 31, 2015 on a net debt basis.

The transaction, which is expected to be completed by year-end 2015, will increase Eldorado’s property portfolio to seven casinos in five markets, including Eldorado Resort Casino in Los Angeles; Scioto Downs Racino in Ohio; Mountaineer Casino Racetrack & Resort West Virginia; and Presque Isle Downs & Casino in Pennsylvania.

“With the acquisition of Silver Legacy and Circus Circus Reno, we continue to execute our long-term plan for expansion. Upon completing the transaction, we will own the three leading downtown Reno casino resorts at a time when the Reno market and the surrounding region is recovering and attracting new businesses that should drive long-term economic support,” said Eldorado Chairman and CEO Gary Carano. “The acquisition is expected to be accretive to our operating results upon closing, builds the critical mass of our gaming operations and fortifies our position in the increasingly attractive Reno gaming market.

The acquisition followed the reports that MGM is proposing to build a $1 billion gambling complex in Downtown Atlanta.


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