On Oct. 10, the same day that Trump Taj Mahal is scheduled to close, Penn National Gaming will open the long-deferred Hollywood Casino Jamul (federal approvals had been holding it up). In celebration, Penn is announcing that relief of the $460 million it spent 
financing the project will come any day now … any day now, folks … folks? The company will still carry $125 million in debt related to the structuring of the deal. Penn has shown its inexperience in tribal-casino affairs here: Station Casinos and Boyd Gaming don’t bankroll the tribal casinos they develop, and Penn’s decision to do so has created a lengthy overhang. And don’t think the Street hasn’t noticed: Penn stock has declined 14%, compared to an average 8% for other regional operators. Still, once the casino is open this will be a sweet deal for Penn. It gets to skim 1.5% right off the top in licensing fees, collect a management fee of 30% of pre-tax earnings (a good incentive for Penn to do its job) and will run the property for at least seven years.
Penn’s been a long time waiting for this — it even postponed a Casino Life magazine profile so that it could follow the Jamul opening — and it looks like it will be worth the delay. Deutsche Bank analyst Carlo Santarelli reiterates that Jamul will be the closest casino to San Diego, adding, “Given this geographic proximity, relative to what we believe to be the 3 primary competing casinos in the area, we would anticipate Jamul to establish no worse than parity with the current win per gaming position levels we believe exist in the market today.” He predicts win/per/day of $327. If true, that could push Jamul to the #1 position in Penn’s casino portfolio.
* Speaking of Boyd, Santarelli noted that it “remains our favored way to play the domestic regional gaming operators,” not least for its continued strength in the Las Vegas market, an area that is up 4% this year, even as regional markets are decelerating. Boyd is also helped by a “benign” promotional climate. Despite “choppy” results, Pinnacle Entertainment was helped by acquisition of The Meadows Casino, Hotel & Banquet Center in Pennsylvania. The latter’s contribution ameliorated what would have been a $13 million shortfall of Deutsche Bank projections. Santarelli wrote that the stock is “fairly valued, though very sensitive to regional performance and sentiment.” For instance, results in the South and Midwest were described as “sluggish.”
* Continuing to devour everything in its path, Scientific Games has purchased Karma Gaming. The latter is a player in the lottery segment, with governmental clients in Minnesota, Ohio and Georgia, along with some big players overseas. “By providing consumer anayltics, creative interactive games and promotions, loyalty programs, mobile apps and secure technology for the sale of eInstants and other games online, Scientific Games remains committed to helping lotteries continue to evolve,” said Group Chief Executive Jim Kennedy. He reminded readers that Scientific is the dominant player in the lottery business — and will obviously become even more so with this purchase.
