What Does The Eldorado-Caesars Deal Mean For Wynn, Sands, and MGM?

by Trefis Team
Las Vegas Sands
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Eldorado Resorts recently announced plans to acquire Caesars Entertainment for a total consideration of $17.3 billion. The combined entity will be the largest player in the U.S. casino industry in terms of casino revenues from operations in the U.S. In this article, Trefis highlights the changes in revenues for both these companies over recent years, and compares it with revenues for Wynn, Sands, and MGM. Our interactive dashboard, How Do Casino Revenues for Eldorado & Caesars Compare With Peers?, focuses on the casino revenues for the 5 casino companies with details about how their casino revenues are distributed by gepgraphically. Additionally, you can view our Consumer Discretionary sector data here.

How have Eldorado and Caesar’s revenues fared in recent years?

  • Eldorado Resorts reported net revenues of $0.9 billion, $1.4 billion, and $2 billion in 2016, 2017, and 2018, respectively. The strong growth over recent years was primarily due to acquisitions. Excluding these incremental effects, net revenues remained almost flat over this period.
  • Caesars Entertainment reported net revenues of $3.8 billion, $4.8 billion, and $8.3 billion in 2016, 2017, and 2018, respectively. A surge was observed in 2018 primarily due to the consolidation of CEOC LLC and the acquisition of Centaur casino.
  • Casino revenues contributed 50% and 75% to Caesars and Eldorado’s top line in 2018, respectively.
  • Both the companies’ casino revenues are concentrated in the U.S. gaming market which has been growing at less than 5% (y-o-y) over the last decade, primarily due to macroeconomic factors and increased competition from international gaming destinations.

What could be the impact of the deal on Wynn, Sands, and MGM?

While Wynn Resorts, Las Vegas Sands, and MGM Resorts are popular in the U.S., they derive a significant portion of their revenues from Macau.

  • Macau is the largest gaming destination of the world with $37.9 billion in gross gaming revenues in 2018. This is comparable in size to the U.S. commercial gaming industry ($41.7 billion in 2018). This compares with gross gaming revenues of $6.6 billion for the Las Vegas strip and $2.5 billion for Atlantic city last year.
  • Macau contributed 90%, 70%, and 39% to the total casino revenues of Wynn, Sands, and MGM in 2018, respectively.
  • A diversified portfolio across the U.S. and Chinese markets has enabled Wynn, Sands, and MGM’s stock to grow two-fold over the last three years.
  • Taking all this into account, we expect negligible impact of the Eldorado-Caesars merger on revenues for Wynn and Sands in the near term.
  • However, MGM Resorts receives 80% of its room revenues from its Las Vegas properties and could possibly face a headwind due to increased competition in the region from the deal.

We have our Trefis price estimate for Wynn, Sands, and MGM at $143, $64, and $34, respectively. To know more about the drivers of our price estimate, you can view our recently published articles by clicking on the adjacent links (Wynn, Sands, MGM).

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