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Tuesday, April 16, 2013

Online gambling breakout in U.S. looms, says Morgan Stanley | Meadowlands Matters |

Online gambling breakout in U.S. looms, says Morgan Stanley | Meadowlands Matters |

By 2020, online gambling in the U.S. will produce revenues as large as those currently produced by the Las Vegas and Atlantic City markets – combined.
So says Morgan Stanley, which estimates a $9.3 billion online market in 2020 vs $6.2 billion for The Strip in 2012 and $3 billion for Atlantic City last year. The company adds that “we believe our market estimates are conservative.”
Boyd Gaming is touted as the biggest stock play in that regard. From the Barron’s post re the analysis:
“We view BYD as best positioned stock in our US coverage to benefit from the US online gaming opportunity given its positioning and relative size. BYD currently has a $710 million market cap, is 7x levered, and we expect it to generate $634 million of 2013 EBITDA. The other well positioned operator in our coverage for online is MGM Resorts International (MGM) but it has a market cap of ~$6 billion and we expect it to generate ~$2 billion of EBITDA in ‘13e, making online less of a driver.”
Morgan Stanley, Morgan Stanley – why does that name sound familiar?
Oh yes, they were a big player in the Revel Atlantic City casino, weren’t they? How did that work again?
“In 2010 Morgan Stanley took a 98% write-down of its $1.2 billion investment in a proposed $2.6 billion Atlantic City Casino [Revel]. Because of the downturn in Atlantic City, Morgan Stanley decided it was better to sell its stake in the property than to ‘throw good money after bad.’
The project was also a public relations nightmare for the white shoe investment bank. Morgan Stanley had received tax rebates pursuant to the project, drawing the ire of New Jersey residents who viewed them as another example of corporate cronyism. Labor unions derided the casino, claiming that instead of creating new jobs, it would create a shell game of taking business and jobs from other casinos. Morgan Stanley purchased the land in 2006 and hired an operator to run the casino. It then tried to sell an equity stake in the property, to no avail – Morgan Stanley sold its stake in the half-built casino to an investor group led by the chairman and CEO of Revel Entertainment.”
Now, I’m being a bit cheeky, in that these companies have thousands of employees – so that just because some of them drove the company toward the iceberg on Revel doesn’t mean they don’t have savvy analysts of the online gambling industry.
But it is an interesting juxtaposition, isn’t it?


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