We are below the Street for Q4 and now also for 2010. The offsetting variable in our LV Locals Macro Model had been population growth and now that variable looks like a non-factor at best.
Q4 Preview
Q4 looks like it was tough one for a lot of the regionals, including BYD. BYD’s exposure to the difficult Las Vegas Locals, Atlantic City and Louisiana (lately) markets probably positions the company to miss near and intermediate term estimates. For Q4, we are projecting net adjusted EBITDA of $92.5 million which includes half of Borgata’s EBITDA. On a consolidated EBITDA basis, EBITDA is estimated to be $82.6 million versus the Street at $88.0 million. Our EPS estimate is $0.01, lower than the Street at $0.04.
2010
The ace in the hole of our Las Vegas Locals Macro Model was always population growth. With continued population growth, the model spat out positive gaming revenue growth for 2010. Now however, population and the labor force are flat at best and may even be declining. Combine flattish population growth with stagnant unemployment and housing prices, the locals LV gaming market may struggle to expand in 2010, better than expected November numbers notwithstanding.
With the macro backdrop in place, we are now projecting adjusted EBITDA of $432 million and consolidated EBITDA of $392 million, essentially flat with 2009. Our EPS estimate is $0.45 versus the Street at $0.49.
The Long-Term
Beyond 2010, the locals LV outlook is bright. Given Nevada's low tax structure, the favorable climate, and cheap housing, we believe the market has significant long-term growth potential. We may be one of the few in the investment community to view a potential acquisition of some or all of the Station Casinos assets favorably. 2010 should be the trough and could be the right time to double down on the LV locals market.