Crown Resorts, Okada Manila and Wynn Resorts have a few things in common. In addition to the obvious – they belong to the casino industry – they are also experiencing cuts in their financial systems due to COVID-19 that is causing them to bleed money. The coronavirus has put more than a small handful of casino operators in a debilitating condition and, like a shark on the prowl, Las Vegas Sands (LVS)may try to take advantage of one or more injured casino operators to swallow it whole.
This is essentially the position Union Gaming’s John DeCree puts forth in a recent update on his take of LVS and its owner and founder Sheldon Adelson. The controversial casino figure, who has been linked to efforts to keep online gaming and sports gambling out of the U.S., said during a recent earnings call, “We are interested in M&A [mergers and acquisitions] … I’m not going to give up on developing Integrated Resorts. I’m going to add on to our strategic thinking, strategic priorities that we can acquire because most of the other companies don’t have the balance sheet that we do, and they don’t have the potential market that we do … so I’m now taking on the strategy of both acquiring and building and developing.”
DeCree used these comments as the basis for his analysis, singling out the three aforementioned targets due to their proximity “to the Asian consumer, and particularly the Chinese consumer,” a requirement of LVS and its M&A strategy. It doesn’t hurt that Crown is currently in bad shape with regulators in Australia and that Wynn’s Asian subsidiary, Wynn Macau, is coming off a quarter that saw it report losses of $154 million. Wynn also has a lot of assets in Macau, which leads DeCree to conclude that an acquisition of the company “makes the most strategic sense for LVS. It would add US$1.6 billion of in place EBITDA immediately (normalized for COVID-19), plus cost synergies. It would give LVS 2,700 additional rooms in Macau and a significant increase in exposure to the higher-end premium mass and VIP segments.”
Okada Manila makes for a decent target because of the growing local market that is following a pattern seen previously by Macau. The Union Gaming analyst explains, “While the Philippines gaming market doesn’t rival Las Vegas or Macau in terms of regulatory maturity and transparency, we think the region possesses many of the same supply-driven attributes that made Macau an attractive investment opportunity 15 years ago. As such, we think the high-quality gaming assets in Manila could be given some serious consideration … Okada Manila tops our list of potential M&A targets in Manila. Now that construction on the final hotel tower of phase I at Okada Manila is nearly complete, the property is ready to reach its potential on the other side of the pandemic.” Okada Manila has also been the recipient of positive comments by Decree pertaining to its revenue capabilities.
