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The Gaming Industry Daily Report for 6/20/17
Presented by: Gaming USA Corporation
Alan R. Woinski, Editor
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The DJIA fell 62 points while Nasdaq was down 51. The day started out well and then fizzled. New highs were set today by MGM, MGP, GLPI and GDEN.

Morgan Stanley downgraded their rating on Boyd Gaming to Equal Weight following a good run in the stock. MS said they no longer see the risk-reward compelling despite being ahead of consensus for 2017-2018 estimates and using a near-peak valuation multiple for their new $26 price target. BYD stock is up 27% YTD. While MS downgraded the stock they did increase their price target from $23. With the stock trading near that price MS said they see more attractive stocks elsewhere in their gaming coverage, namely MGM and WYNN. MS does have a $34 bull case but an $18 bear case.

Bernstein upped their June GGR forecast for Macau to 30-32 percent growth, moving them more to the high side and double the low end of forecasts. Bernstein said the Typhoon scare last week had no impact as GGR in the first 18 days of the month is up 36% over the same period last year.

Last week we told you there were rumors the FTC was not going to approve the FanDuel/Draft Kings merger and yesterday and today that has exploded all over the media. The FTC made it official, announced it would file an antitrust lawsuit that seeks to block the merger alleging the deal would harm consumers who play DFS contests. The companies said they are disappointed in this decision but chances are last week there were tears shed and walls punched. The DFS industry has enough issues as it is, what with not being able to make a profit and certain states still debating whether it is legal or not. Besides the FTC, attorney generals in California and Washington DC said they are also challenging the merger. Is the bell tolling for either or both of these companies? Once again we ask why anyone would fund this business or these companies?

In Florida, Leon County Circuit Judge John Cooper reversed his previous decision and now said the pre-reveal games that are in bars, strip malls and convenience stores throughout the state, are illegal and violate a law banning slot machines outside of approved sites. Florida gambling regulators and the Seminole Tribe had asked him to reconsider his ruling from March which we believe mistakenly authorized the games. Remember that this all started when the Seminole Tribe told lawmakers they better get rid of these machines or they will stop paying. The Division of Alcohol, Tobacco and Firearms confiscated the machines and the manufacturer and distributor sued the state. The judge said he made a mistake in March.

A decision from the Bureau of Indian Affairs on whether the Mashpee Wampanoag Tribe in Massachusetts qualifies for reservation lands was supposed to be released yesterday. Monday came and went with no decision and no word on when there would be one.

Spokane County in Washington State sued the Dept. of Interior, seeking a reversal of their decision to approve a casino being built by the Spokane Tribe of Indians, claiming it will create new hazards for Fairchild Air Force base pilots because the casino is located in the base's main flight path and may cause distractions and accidents. They accused the DOI of defying basic common sense and overriding local election officials' opposition to the casino? They join the competing Kalispel Tribe who sued the Bureau of Indian Affairs in federal court in April over this casino development.

Places like Empire City Casino in Yonkers, Sands Bethlehem, MGM National Harbor and now casinos on the LV Strip all charge for valet parking. They have something in common and that is strong visitation and revenue. So forgive us for scratching our heads over the decision by Mohegan Sun Pocono, who has seen revenue spiral lower the past few months, to announce they will begin charging for valet parking and will no longer be holding free events like a fireworks display on July 4th or Oktoberfest. The decision on parking was said to have been made because people are complaining about how long the waits are for valet parking. Wouldn't it be better to just hire better and more workers? Considering how there have been reports of a lot of belt tightening and things like draft beers being downsized to 12 ounces from 16 ounces, we would say that the revenue plunge at Mohegan Sun Poconos is not going to turn around any time soon.

Speaking of Empire City, are they getting ready to be approved for full table games? A Daily Racing Form story suggested Yonkers races could be moved to a training track from Belmont Park which could be expanded. The current track from Yonkers would then get the land from the current track to expand ahead of what the DRF said would be a potential full blown casino possibility in 2021. It seems a bit strange to have Yonkers Raceway at Belmont, which is minutes from Aqueduct but then again it seems ridiculous to even have horse racing anymore in most locations.

Scientific Games Corp. announced their board of directors approved a rights agreement. The rights agreement could go into effect if there is a 5% or greater holder, such as one outside of the US that is not subject to jurisdiction in the state of Delaware. SGMS said the rights agreement is to protect shareholders so that they company cannot get in trouble with respect to its licenses, contracts, franchises and other regulatory approvals. Remember that the company's shareholders can also be asked to be suitable for licensing.

Churchill Downs has decided they will add historical racing machines at their Kentucky track. The Kentucky Horse Racing Commission was expected to approve the measure today but some said they are not sure if it will be at the Churchill Downs track or another CHDN owned property. We never understood why CHDN held out on getting these machines all this time when other tracks in Kentucky had them. Surely CHDN did not really believe that slots at tracks were going to have an easy time being legalized in the state.

The Universal Entertainment Corporation situation with founder Kazuo Okada, which has spilled over to the namesake integrated resort in Manila, now has even more revelations. A Special Investigation Committee established by Universal has uncovered two more cases of alleged illegal activity. The first originated from a US$80 million bank loan granted to Okada Holdings Ltd in February 2014 for the purchase of land in Korea. Okada then allegedly created a security for the $80 million held by Universal Entertainment Korea Co, a wholly owned subsidiary of Universal at the same time the financial institution granted the loan. By the time the security interest was canceled the following month, Universal Entertainment Korea had paid US$170,000 in interest that should have been paid by Okada Holdings Limited. The second case was alleged to have taken place in May 2015 when Kazuo Okada issued a bearer check in the amount of HK$16 million from a bank account under the name of Tiger Resort Asia Limited, a Hong Kong subsidiary of Universal Entertainment Group. Three days later Okada was said to have withdrawn HK$16 million from a Tiger Resort Asia Limited account based on this check. This is all in addition to what sparked all this, the original case involving the transfer of HK$135 million in March 2015 from Tiger Resort Asia Ltd. to a third party and subsequent HK$130 million then transferred to Okada Holdings. John Smith, the Las Vegas reporter who has become fascinated with this situation, reported that the Nevada Gaming Control Board is investigating this situation. It would be news if they were not starting an investigation.

The latest meetings in Japan contained some suggestions on how to handle local visitation to the integrated resorts. The Experts' Committee suggested Japan residents would be required to use a new national identity card, MyNumber, to gain entry into the casinos. There would be a firm limit to the number of times they would be allowed to enter over the span of a month, not something that was mentioned previously. Again, we are not sure if this is just throw stuff against the wall to see what sticks ahead of the eventual real rules and regulations but there is some progress.

Golden Entertainment announced Rocky Gap Casino Resort re-sculpted the entire back of the Maryland resort to include a 2,400 square foot terrace and lounge area to enhance the location's views of the Rocky Gap State Park.

Alan Meister of Nathan Associates and Gene Johnson of Victor Strategies released "Economic Impact of NJ Online Gaming: Lessons Learned.” Another group just jumped on the bandwagon AFTER online gaming finally came into its own. Unfortunately just like those who made predictions before it was legalized in NJ, the predictions of how this will be replicated in other states will wind up being just as misguided because legalization of online gaming in other gaming states will not be the same situation mainly because of the geographic location of casinos in other states. In other words, you will not have the same impact where there are casinos within an hour of every person in the state. We were the only ones who said that NJ would be successful with getting customers back because those living in North Jersey were NOT going to Atlantic City anymore because it was too far away and there are out of state options that are closer. You don't have that situation in other states. In other words, just like what we said about the initial studies on what online gaming will be like in NJ, read the ones about the other states for entertainment purposes only because there is a very good chance they will be wrong.

GVC Holdings has launched The Clubhouse, a new live casino studio for its portfolio of gaming brands. They called it the most significant upgrade to its live dealer offering since it acquired bwin.party. The studio has been developed in collaboration with My Agency and live casino specialist Evolution Gaming.

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