• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Setting up for Q1 beat but FY2014 guidance better than we thought. Japan?

CONF CALL

  • Wholly-owned business performed in-line in 2013
  • Relaunched Penny Lane at 4 LV properties in November
  • Penny Lane now in place at 12 BYD properties; seeing better response by Penny Lane
  • Earliest debt maturity is 2018
  • Open to more acquisitions
  • Wilton Rancheria:  early stage design work under way 
  • Interested in Japan
  • Online gaming:  Borgata has 1/3% of market
  • Discontinuing quarterly guidance for Borgata
  • October- mid Nov: strong trends
  • Casual players visitation declined outside of Nevada
  • Top-tier players doing well
  • LV Locals
    • reduced marketing spend by $2MM.  Improved operating margins by 120bps.  Non-gaming promising area of growth
  • Downtown
    • Hawaiian charter service running much more efficiently
    • Optimistic on Downtown business in 2014
  • Midwest & South
    • $9.3MM one-time property tax adjustment at Blue Chip
    • Winter weather has been a record
    • Severe weather reduced EBITDA by $3MM
    • Delta Downs:  notable bright spot, posted double digit EBITDA growth; annual records for EBITDA, rev, and coin-in.
  • Borgata
    • Below expectations
    • Unusally low hold in December reduced EBITDA by $3.6MM, higher property tax decreased EBITDA by ~$2.1MM in the quarter and $8.4MM for the year, and bad weather impacted EBITDA by $1MM
    • Borgata/PartyPoker:  43% share of I-gaming, 85% of online players have not had rated play in the last 2 years
    • Significant uptick in promotional spending, although Borgata have not matched the increase
    • In Feb, launched online/mobile platforms for 1st 3G/4G devices
  • December:  redeemed $950MM 2015 note
  • Peninsula has expanded FCF by $100MM
  • $1.1 bn tax loss carryforward (couple of dollars per share)
  • Cash:  $268MM at Boyd, $27MM Peninsula, $17MM Borgata
  • Boyd senior leverage:  4.2x (covenant 5.0x)
  • Boyd total leverage:  6.5x (covenant 8.5x)
  • Peninsula leverage:  6.3x (coventnat 7.0x)
  • Borgata's covenant EBITDA was $121.8MM compared to acquired minimum level of $110MM
  • 2014 maintenance capex:  $125MM ($15MM Peninsula, $25MM Borgata)
  • Final Phase of Kansas Star will cost $20MM
  • 2014 guidance
    • Total D&A:  $255-$260MM (Boyd:  $130MM, Peninsula $72MM, Borgata $55MM)
    • Total interest expense:  $300MM (Boyd: $155MM, Peninsual $75MM, Borgata $70MM)
    • Deferred Rent:  $4MM
    • Pre-opening:  $5MM
    • Share-based compensation:  $16MM
    • Shares outstanding:  110MM
    • Do not expect weather to be an issue going forward.  $8MM in quarterly and annual impact
    • Expect LV Locals rev and EBITDA growth to be similar to that in 2013
    • Downtown Locals: minimal EBITDA growth
    • Midwest/South expect growth in 2H 2014
    • Borgata EBITDA similar to 2013 - does not include I-gaming or lower property taxes
    • Corporate expense:  $55MM  

Q & A

  • LV Locals why flat revenue despite market up?  False positive in December #s.  No major change in direction or slope of LV market.  Have to look at Jan/Dec together.
  • Hotels have benefited from increased convention business on Strip, particularly in March
  • Midwest/South Cannibalization:  a lot of disruption from weather; lapping Shreveport competitor in June
  • NJ I-gaming:  ramping slowly but nicely
  • Bad weather will impact EBITDA by $8-10MM in 1Q 2014
  • Japan:  exploring options
  • Regional acquisitions:  fewer opportunities but looking
  • AC market :  closing of Atlantic Club had no impact on Borgata
  • Selling assets?  Open to it
  • Acquired IP in the low $30MM EBITDA; today, it is #2 in Biloxi and generating above $30MM