Given the financial and operation leverage, BYD's quarters are wildcards and Q3 is no exception. Underlying fundamentals don't appear to be getting worse but they don't seem better either.
We continue to search for reasons to get positive on BYD considering the almost universal hatred for this stock in the analytical community. Unfortunately, we are coming up snake eyes for now. There are reasons not to short it, however: business is stabilizing, bank negotiations look like they are going well, and the free cash flow yield is very high.
The stock had a 10% move on 10/8 when the August Nevada numbers came out showing the LV locals market grew 3% YoY. Well, that really didn't excite us because gaming volume actually fell 4% which was right in line with what our model was projecting based on the seasonally adjusted performance of the prior 3 months. In other words, August fundamentals neither accelerated or decelerated from recent trends as can be seen in the following chart.
While everyone seems to be focused on YoY comps, we try and look at historical seasonal patterns and adjust results to view the sequential performance. Given the volatility over the past two years, even two year comps are not that meaningful. Overall regional gaming trends seem to be following the same pattern as the locals. Seasonally adjusted revenues are exhibiting flattish sequential growth. At least business is stable. Here are our Q3 estimates.
BYD 3Q Projections:
- Las Vegas locals revenue of $146MM and EBITDA of $30.4MM
- Downtown Las Vegas revenue of $54Mm and EBITDA of $7MM
- Midwest & South revenues of $189MM and EBITDA of $41MM
- Borgata revenue of $211MM and EBITDA of $53MM
- Corporate expense: $10MM
- D&A: $37MM
- Share of Borgata D&A: $18MM
- Share based comp: $3MM
- $1.1MM of deferred rent
- $27MM of interest expense , plus $12.4MM at Borgata
- $10MM of MI