BYD: AC GROWTH?

Takeaway: The performance of Borgata could lead to EPS upside in Q3 and beyond

The performance of Borgata could lead to EPS upside in Q3 and beyond 

  • A central tenet to our Long BYD thesis is the potential for actual sustained growth (not just stability) in 2 of BYD's highest margin but chronically underperforming markets: Las Vegas locals and Atlantic City
  • Borgata in AC, 50% owned by BYD, posted a 14% increase in GGR in September and Q3 overall which should put EPS and EBITDA above Street expectations, 2c and $2-3m above, respectively, per our estimate. Remember that New Jersey offers the 2nd lowest gaming tax rates behind only Nevada so flow through on incremental revenue growth is high
  • Borgata is benefitting from a better macro picture certainly, but the real upside is coming from supply contraction. As can be seen in the chart, both slot and table volumes began ascending following the first closure (AC Hilton in February of 2014
  • Borgata is the most desirable property in Atlantic City and seems to be gaining the most share from the recent casino closings.

 

BYD: AC GROWTH? - borgata


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