Jefferies highlights per-room earnings at Wynn, Caesars and MGM

According to a Jefferies research note, analyst David Katz advises investors evaluating casino operators to weigh operating efficiency, with earnings per room as one gauge. His estimates put Wynn Resorts at $180,000 in EBITDA per Las Vegas room for this year, while Caesars Entertainment is projected at $83,000 and MGM Resorts International at $77,000.

Katz said the Las Vegas Strip is now more a hospitality and entertainment business supported by gaming than a pure casino model, and that operators pursuing premium strategies can justify premium valuations. MGM and Caesars are the two largest Strip operators by room stock, but Wynn, which operates Encore, generates greater per-room earnings than its two rivals, according to the estimates.

The same efficiency and quality yardsticks apply to regional casino companies, and Katz singles out Monarch Casino & Resort and Red Rock Resorts as strong on those measures. Monarch's two-casino approach and Red Rock's commitment to the Las Vegas locals market are cited as favorable traits. Katz argues that "Operators with concentrated exposure to favorable local markets continue to generate higher returns than those operating broad portfolios across competitive jurisdictions," and he adds that "local market share, database quality, and disciplined capital deployment are more important drivers of earnings density than scale alone."

Monarch has been reported as a possible buyer of gaming assets on the market or soon to come up for sale, but the company is highly selective, according to the report. It has been one of this year's best-performing casino stocks despite owning just two gaming venues.

In Katz's view, the companies posting the strongest EBITDA per gaming position or per room share certain strengths: "differentiated assets, premium customer exposure, attractive market positions, and disciplined capital deployment." Looking ahead, he expects share performance to depend less on adding new properties and more on whether management can squeeze more earnings out of the rooms and gaming positions already in place.