Bally Stock: Chicago Casino Win Could Be Okay (NYSE:BALY)
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Bally Stock (NYSE:BALY) is optimistic about Chicago casino win. The sector exploded after New Jersey legalized casinos in 1976. Resorts International (NASD:RES) was the first to go public in 1978.
In 1978, Resorts shares traded at $18. By September, its Class A stock jumped $23 on a Tuesday reaching $190 a share. The next day, Class B stock went up $54 in a single day to $266. New York and Philadelphia are only a short drive away. NJ law had ambitious social agenda goals. After 2006, the recession came home to roost competitively. The most basic of all imperatives of the casino business applied: distance from a property and potential customer pool are the key factors. Bally's edge was diminished by legalizations in its key feeder markets north, south and west.
Bally Stock: Chicago Casino Win Could Be Okay (NYSE:BALY)
Harrahs lost its New Orleans casino when it was struggling. Now it's a Bally property. It's the same rhetoric echoing from the past. It might be better to keep promises. In the meantime, management and city officials should keep their promises to themselves. it is the old rhetoric. in the mouths of Chicago enthusiasts.
The winning bid is to locate the property in the West Loop section of Chicago. It is a mixed commercial and residential area. The location is home to many entertainment and dining options beamed at millennials. Bally Chicago will debut with casinos in long established areas of the metro area, unlike AC, which held sway for 40 years.
Des Plaines is 29 minutes driving time from downtown. Elgin is 51 minutes from the downtown, Aurora 51 min. from it, Rock Island 2.47 hours from there, Joliet 53 min from Downtown, and the West Loop is already very busy. The location choice was influenced to a degree by a built in social agenda. Chicago residents have just retained a private security company to augment patrols of the city police. Mayor cried foul. It will be a long, hard scrabble climb to build a database responsive to its offers.
Illinois casinos generated $423m in GGR between January and April 30 this year. About $200m of that came from the Chicago area. Rivers casino, the state's biggest earner, clocked an average of $284 per day slot win for pre-pandemic 2019. The Rivers property in nearby Des Plaines has in endgame a $87m expansion. Bally property is expected to debut in 2026. It is common for bidding developers to exaggerate revenue projections. It could be a good place to pivot down as reality bites. They think the starting point assumes a blowout debut fueled by curiosity visits common to new properties.
Bally is entering a crowded market in a not particularly plus location. The new property is situated in the middle of a 9.4m population base of Chicago.
The answer will be found in the extent to which the new property can take market share from the existing casinos. The answer comes from Bally management and the city in terms of traffic solutions, security, marketing skills and operational success.
Bally Corporation operates 14 casinos in 10 states and has a foothold in sports betting in 18. It is guiding $2.4 billion in revenue for this year with adjusted EBITDA of $560-$580 million. Its market cap is $1.52 billion. Long-term debt is 3.49 billion with a current ratio of 1.00. Cash position is only $206 million, but the company is owned by a hedge fund.
Bally won the bid for the Chicago casino project. The company turned a loss of $0.30 in 1Q'21 to $ 0.03 in 2Q '22. Book value is $30.85 above the stock price. It will now face approval from the city council and the state gaming board.
