Singular Research Director’s Letter: June performance 2020

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Singular Research Director’s Letter: June performance 2020

 

 In the first half of June, states continued to reopen, but those that reopened early and had relaxed their social distancing guidance faced an exponential increase in new cases and hospitalization rates.  On June third, Texas reopened bars, indoor seating at restaurants, and gyms when there was roughly 1,400 new cases per day; however, Texans did not follow correct social distancing habits, leading to the escalation of new cases to nearly 6,000 per day on June 26, which then forced Governor Greg Abbott to again close bars and other businesses that had once reopened.  By the end of the month, new cases in Texas had reached 8,000 per day.  Other states such as California, Arizona, and Florida have seen dramatic increases in new Corona virus cases.  However, new deaths from the Corona virus have not been as pronounced as they were in New York City which leads many to believe that we are now in a new stage of the Corona virus battle.    

The June Purchasing Managers Index (PMI®) rebounded to expansion territory, registering 52.6 percent, an increase of 9.5 percentage points from the May reading of 43.1 percent.  Similarly, the Conference Board Leading Economic Index® (LEI) increased 2.8 percent in May to 99.8 (2016 = 100), following a 6.1 percent decrease in April and a 7.5 percent decline in March.  Although both the PMI and LEI are still in a weak state, investors saw optimism in the results as they showed sequential growth.  The unemployment rate fell to 11.1% (13.3% in May) as businesses have started the rehiring process.

 For the month of June, the Singular coverage list outperformed the S&P 500 and the Russell 2000 by 232 and 76 basis points, respectively.  Year-to-date, the Singular coverage list has underperformed the S&P 500 and outperformed the Russell 2000 by 806 and 127 basis points, respectively.  Over the last twelve months, the Singular coverage list has underperformed the S&P 500 and outperformed the Russell 2000 by 851 and 451 basis points, respectively.  As new Corona virus cases dramatically increased from states relaxing social distancing measures, markets wavered in June.  Investors were enthusiastic over an increase in general economic activity and did not appear to favor one specific sector.

top 5 performance june 2020

 The month of June’s performance was based mainly on positive investor sentiment of economic reopening throughout the United States.  All five of our top performers had no major press releases to identify a reason for growth; however, the top five performers are all based in the U.S. and Canada.  Investors with long term vision are looking past the Corona virus and are investing in domestic companies like SALM and IEC that will not be affected by further trade tension with China.  Furthermore, SA is a safe haven play in case of times of increased economic uncertainty while HBIO and ANIK are investments that are tied to positive outcomes with Corona virus treatments. 

ZM, a short position, was our worst performer for the month as the company reported great results with revenue up 169% year-over-year and a 354% increase in new customers.  We continue to believe that demand and usage of the ZM platform will wane as the Corona virus fades and other companies enter the cloud-based video communications market.  EHTH had a rough month after being a top performer in May.  The company issued a report that the average unsubsidized family of four could face average annual deductibles and insurance premiums of $25,000 in 2020, which could lower the demand for EHTH’s product. 

For June, we initiated coverage on Meridian Bioscience (VIVO).  Meridian is a fully integrated life science company that develops, manufactures, markets, and distributes a broad range of innovative diagnostic products.

june 2020 new initiation

 

 

                We wish to thank our clients for their support and belief in our process.  To learn more about Singular Research and register for a 14-day trial offer, please follow the link below.  

14-Day Trial Offer

Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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Top Growth & Value small caps present at Singular Research’s Spring Select Webcall on 5/28

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Top Growth & Value small caps present at Singular Research’s Spring Select Webcall on 5/28

 

At Singular Research, we focus on small and micro-cap stocks that are under covered on Wall Street.  These stocks have a niche business model and have yet to be widely discovered.  Many of the Corona virus fears in the stock market today do not affect these stocks.  Our small-cap Spring Select webinar will focus on top ranked emerging growth, undervalued, and under covered companies that exemplify our research and provide exciting alpha opportunities.  Please see below for our conference presenters, the schedule of presentations, and a brief description with valuation metrics on the companies that are presenting. 

To register for the webinar on May 28, please follow the link: https://register.gotowebinar.com/register/5157882020359085070

 

Schedule of Presenting Companies:

6:15 am:    NV5 Global Inc. (NVEE) Mr. Dickerson Wright Chairman & CEO

7:00             Luna Innovations Incorporated (LUNA) Mr. Scott A. Graeff Pres, CEO, Treasurer, Sec. & Director

7:45:            A-Mark Precious Metals Inc. (AMRK) Mr. Gregory N. Roberts CEO & Director

8:30:            IEC Electronics Corp. (IEC) Mr. Thomas L. Barbato CFO & Sr. VP

9:15:             Emergent BioSolutions Inc. (EBS) Robert Burrows COO-IR

10:00:         Banco Latinoamericano, S.A (BLX) Ms. Ana Graciela de Méndez Exec. VP of Fin. & CFO

10:45:          Good Natured Products Inc. (GDNP.V) Mr. Paul John Antoniadis Exec. Chair & CEO

11:15:            Harvard Bioscience Inc. (HBIO) Mr. James W. Green Pres, CEO & Chairman

12:00 pm: JMP Group LLC (JMP) Mr. Joseph Andrew Jolson Chairman & CEO

12:45:         IRadimed Corporation (IRMD) Ms. Leslie L. McDonnell Pres, CEO & Director

1:30:            Singular MMI market strategy report

 

Luna Innovations Inc. (LUNA)

$9.75 Price Target, Buy, Current Price: $6.10 (5/20/20)

Luna Innovations Inc. develops and markets fiber optic sensing and test and measurement products worldwide. The company has two operating segments. The products and licensing unit sells the company’s commercial fiber optic test and sensing equipment and the technology development segment performs contract R&D for U.S. government agencies.

luna 5 20 2020

 

 

A-Mark Precious Metals Inc. (AMRK)

$19.00 Price Target, Buy Long-Term, Current Price: $16.49 (5/20/20)

A-Mark Precious Metals (AMRK) is a full-service precious metals trading company offering a wide array of products and services. Products include gold, silver, platinum, and palladium for storage and delivery in the form of coins, bars, wafers, and grain. Services include financing, leasing, consignment, hedging, and a variety of customized financial programs.

amark 5 2020

 

 

IEC Electronics Corp. (IEC)

$11.50 Price Target, Buy, Current Price: $7.62 (5/20/20)

IEC Electronics is a provider of electronic manufacturing services to advanced technology companies that produce lifesaving and mission critical products in the medical, industrial, aerospace, and defense sectors.

iec 5 2020

 

 

Emergent BioSolutions Inc. (EBS)

Price Target Under Review, Buy, Current Price: $88.59 (5/20/20)

Emergent BioSolutions (EBS) is a global specialty life sciences company that develops and commercializes vaccines, drugs and devices that address biodefense threats. The Company is a preferred provider of biodefense products and services to the U.S. government under multi-year contracts. Its most valuable product, BioThrax is the only FDA-approved anthrax vaccine. The Company’s products are sold mainly in the U.S. as well as internationally.

ebs 5 2020

 

 

Banco Latinoamericano SA (BLX)

$24.00 Price Target, Buy Long-Term, Current Price: $11.36 (5/20/20)

Banco Latinoamericano a multinational bank, primarily engages in the financing of foreign trade in Latin America and the Caribbean. The company operates through two segments, Commercial and Treasury.

blx 5 2020

 

 

Good Natured Products (GDNP.V)

$0.27 Price Target, Buy Long-Term, Current Price: $0.16 (5/20/20)

Good Natured Products Inc., formerly Solegear, is an award-winning, publicly traded bioplastics company founded in 2006 and based in Vancouver, British Columbia, Canada. Good Natured is an innovator in the field of next generation bioplastics made from annually renewable plant-based sources.

gnp 5 2020

 

 

Harvard Bioscience (HBIO)

$4.00 Price Target, Buy, Current Price: $2.68 (5/20/20)

Harvard Bioscience (HBIO) develops, manufactures, and markets scientific equipment, systems, and consumables that are used by thousands of researchers worldwide. The Company was founded in 1901 by a Harvard Medical School professor and has grown through a combination of new products and acquisitions. HBIO is headquartered in Holliston, Massachusetts and has sales and/or manufacturing operations in the U.S. and Canada, the UK, Germany, Sweden, France, Spain, and China.

hbio 5 2020

 

 

JMP Group LLC (JMP)

$6.00 Price Target, Buy, Current Price: $2.73 (5/20/20)

JMP Group is a diversified financial services company. The company’s main lines of business consist of a broker-dealer and investment bank focused on the middle market, and asset management subsidiaries focused on alternative investment strategies and a corporate credit manager.

jmp 5 2020

 

 

IRadimed Corp. (IRMD)

$30.00 Price Target, Buy, Current Price: $21.29 (5/21/20)

Iradimed develops, commercializes, and markets MRI-compatible medical devices that can be used safely on patients undergoing MRI procedures. The Company markets MRI-compatible IV infusion pumps that monitors patient’s vital signs and has plans to introduce a magnetic detection device in 2019 for MRI scanner rooms. The Company makes sales directly in the U.S. and through distributors internationally. Iradimed has an installed base of over 5,000 infusion pumps and more than 260 patient vital signs monitors.

irmd 5 2020

 

 

NV5 Global, Inc. (NVEE)

$94.00 Price Target, Buy, Current Price: $44.80 (5/21/20)

NV5 Global, Inc. is a provider of professional and technical engineering and consulting solutions in the infrastructure, energy, construction, real estate, and environmental markets. The Company’s clients include the U.S. federal, state and local governments, and the private sector.

nv5 5 2020

 

For a complimentary research report on any of these companies mentioned, please e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or call 818-222-6234.  Thank you.

Singular Research’s Institutional 1-on-1 Webinar on 6/25

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Singular Research’s Institutional 1-on-1 Webinar on 6/25

 

As states and economies around the world reopen, the S&P 500 and Russell 2000 have increased 39% and 42% off their March 23rd lows.  Both large and small cap stocks have made a tremendous comeback, but small cap stocks appear to have more room to the upside given their undervaluation compared to large cap stocks.

1 on 1 webinar 6 2020

 

At Singular Research, we focus on small and micro-cap stocks that are undercovered on Wall Street.  These stocks have a niche business model and have yet to be widely discovered.  Many of the Corona virus fears in the stock market today do not affect these stocks. 

Our 1 on 1 Institutional Webinar highlights four companies that have either been shielded from the negative effects of the Corona virus or have benefitted from such an uncertain time.    Please see below for our webinar 1 on 1 schedule and a brief description with valuation metrics and growth catalysts of the companies that will be in attendance. 

 

To register for the webinar on June 25, please follow the link:

https://register.gotowebinar.com/register/8885806981336621323

 

Schedule of Companies (PDT):

  • 7:00 AM - 9:00 AM: Luna Innovations Inc. (LUNA), Scott A. Graeff, President & CEO
  • 9:00 AM - 11:00 AM: NV5 (NVEE), Alex Hockman, President & COO and Ed Codispoti, CFO
  • 11:00 AM - 1:00 PM: The Rubicon Project, Inc. (RUBI), Nick Kormeluk, CIRO
  • 1:00 PM - 3:00 PM: Good Natured Products Inc. (GDNP.V), Paul John Antoniadis, Executive Chair & CEO
  • 3:00 PM - 5:00 PM: Manufactured Housing Properties Inc. (MHPC) , Michael Z.Anise, President

 

Luna Innovations Inc. (LUNA)

$9.75 Price Target, Buy, Current Price: $6.31 (6/16/20)

Luna Innovations Inc. develops and markets fiber optic sensing and test and measurement products worldwide. The company has two operating segments. The products and licensing unit sells the company’s commercial fiber optic test and sensing equipment and the technology development segment performs contract R&D for U.S. government agencies.

luna 6 2020

In their first quarter, the company delivered its tenth successive quarter of double-digit revenue growth.  So far, the COVID-19 pandemic has had a minor impact on LUNA’s operations.  Management reiterated its FY:20 outlook, although guidance will now trend towards the lower end of the earlier range.  We maintain our BUY rating and our target price at $9.75 per share.

 

A-Mark Precious Metals Inc. (AMRK)

$19.00 Price Target, Buy Long-Term, Current Price: $17.45 (6/16/20)

A-Mark Precious Metals (AMRK) is a full-service precious metals trading company offering a wide array of products and services. Products include gold, silver, platinum, and palladium for storage and delivery in the form of coins, bars, wafers, and grain. Services include financing, leasing, consignment, hedging, and a variety of customized financial programs.

amark 6 2020

The company reported strong Q3:20 results, delivering net income higher than any fiscal full year period since being public.  Higher economic uncertainty due to the COVID-19 pandemic is beneficial for the company as AMRK tends to be more profitable in times of volatility.  We increase our price target to $19.00 (earlier $10.00) and maintain our rating at BUY-Long-Term.

 

 

The Rubicon Project, Inc. (RUBI)

$9.50 Price Target, Buy, Current Price: $7.32 (6/16/20)

RUBI provides a technology solution to automate the purchase and sale of digital advertising inventory. Sellers (which include websites or mobile apps) provide digital advertising inventory to RUBI’s platform in the form of advertising requests. These ad requests from sellers are sent to buyer, which can then place bids on them.

rubicon 6 2020

Q1:20 results were below management’s stated guidance which was negatively impacted by COVID-19.  Q2:20 guidance is a touch lighter implying flat sales growth at the mid-point of their guidance.  While near-term concerns remain a headwind, we are optimistic on their long-term prospects, especially with the entry in the CTV market after their acquisition of Telaria.  We lower our target price to $9.50 (earlier $14.00) and maintain our BUY rating given the upside potential.

 

Good Natured Products (GDNP.V)

$0.27 Price Target, Buy Long-Term, Current Price: $0.14 (6/16/20)

Good Natured Products Inc., formerly Solegear, is an award-winning, publicly traded bioplastics company founded in 2006 and based in Vancouver, British Columbia, Canada. Good Natured is an innovator in the field of next generation bioplastics made from annually renewable plant-based sources.

gnp 6 2020

 

For a complimentary research report on any of these companies mentioned, please e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or call 818-222-6234

 

Thank you.

 

 

Century Casinos Inc. ( CNTY) Partners With Circa Sports Throwing Down The Gaunlet In US Sports Gaming Market

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Century Casinos Inc. ( CNTY) Partners With Circa Sports Throwing Down The Gaunlet In US Sports Gaming Market

 

Summary

Partnership with Circa improves long term growth profile.

All casinos now reopened.

Stock is attractively priced relative to industry group comps.

century casino june 2020

Data by YCharts

 

Looking to rebound from a $45.9 million first-quarter loss delivered by the coronavirus pandemic, Century Casinos (NASDAQ:CNTY) reopened five gaming properties in Canada as of June 13, following casino openings in Missouri and West Virginia, while plans to reopen two casinos in Colorado came to fruiation June 15.

Headquartered in Colorado Springs, Colo., Century Casinos (CNTY) has pleased most shareholders, returning 32 percent on investment over the last three years, though earnings per share have disappointed analysts and shareholders would like to see CEO salary more in line with the median.

In April, Century partnered with Las Vegas-based Circa Sports to bring internet sports gambling to Colorado. The 15-year agreement with Circa creates a strategic opportunity for added revenue as online sports betting is projected to surge to $20 billion by 2024. Terms of the deal include a market access fee, share of net gaming revenue and minimum revenue guarantee payable to Century each year.

Circa Sports ( privately held) Chief Executive Officer Derek Stevens said his team “simply hit it off” with Century’s management team, and he felt the companies were a good fit for each other.

Stevens, who owns Golden Gate and The D casino-hotels in Las Vegas and is developing the Circa hotel, sees Colorado as an ideal place to expand his sports betting footprint outside of Nevada. Colorado voters in November approved legislation for sports wagering to start May 1.

“The market question is still to be determined as there are a wide range of projections for Colorado, but we think Circa Sports will assume a solid position within the Colorado market,” Stevens said.

Century and Circa submitted applications with the state of Colorado to obtain necessary licenses before May 1. The Circa Sports TM Mobile sports betting app, which launched in May, will operate in association with one of Colorado’s master licenses for sports wagering held by Century Casinos subsidiaries.

Circa is certainly interested in partnering with other gaming properties throughout the United States, depending upon a favorable regulatory environment, Stevens said.

Competitive strategy

With its tagline, “Where the Pros Play,” Circa intends to find a unique niche in Colorado, even as it competes with betting platforms such as DraftKings (DKNG) and FanDuel, which currently operate in several states that offer legalized online sports wagering.

“We plan on taking larger limits than most, similar to what we do in Nevada,” Stevens said. “We will also offer some unique products such as cross-sports parlays, something that has been extremely popular in Las Vegas.”

There is growing speculation that more states will legalize online sports gambling to replenish coffers that were drained by the economic shutdown brought on by the virus. Legislators will be looking at every possible revenue source following the pandemic, Stevens believes.

“Sports wagering is still in its infancy in the United States,” he said. “The percentage of states that will allow sports wagering will continue to increase in the next 24 months.”

Reopening casinos

Century Casinos Co-CEO Peter Hoetzinger said the company was hoping to reopen its casinos in Cripple Creek and Central City, Colo., in mid-June, but that has yet to happen. Century also owns casinos in Missouri, West Virginia, Canada, Poland and England. It operates pari-mutuel off-track horse betting networks in Alberta, Canada.

The company in May opened its eight casinos in Poland, and resumed operations in June at casinos in Edmonton, St. Albert and Calgary, Alberta, as well as Century Mile Racetrack and Casino and Century Downs Racetrack.

Prior to reopening, Century Casinos implemented comprehensive sanitizing and social distancing protocols based on Alberta Health Services guidelines and newly established industry standards.

In its May 20 first-quarter earnings report, Century reported net operating revenue and EBITDA were negatively impacted by the company’s acquisition of Mountaineer Casino and Racetrack, Century Casino Cape Girardeau and Century Casino Caruthersville in Missouri.

The COVID-19 pandemic crushed first-quarter operations, which included a $33 million impairment of goodwill and casino licenses.

“During these unprecedented times, our primary focus is the health, safety and well-being of our team members, guests and communities,” Century Casinos Co-CEOs Erwin Haitzmann and Peter Hoetzinger commented in the earnings report.

“Through the end of February, we were encouraged by the strength of our operations and the significant growth in net operating revenue and adjusted EBITDA driven in part by our recent acquisition of properties in Missouri and West Virginia. We look forward to reopening our properties and we plan to meet or exceed all safety requirements set forth by health officials.”

Improved growth outlook

Century’s strategic partnership with Circa may be leveraged to include all present and future US properties , subject to state approvals, combined the recent strategies acquisition of properties from El Resorts Inc. (ERI) creates a attractive investment opportunity in CNTY.

Century Casino (CNTY) trades at lower price to book value .88 vs 2.56 and lower price to sales ratio at .66 to1.47. than the casino/resort industry group. Current Wall Street mean estimates call for 25% long term eps growth and a twelve-month price target of $7.75.

Disclosure: I am/we are long CNTY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

 

Free trial offer: https://seekingalpha.com/author/singular-research#regular_articles

Covid outbreak 2nd wave claims by media not supported by balanced data sets

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Covid outbreak 2nd wave claims by media not supported by balanced data sets

 

Media hyping 2nd wave showing increased cases , particularly in states that were first to reopen, TX, FLA , AZ...

Data does not support this , increased cases  are largely the result of increased testing, positivity rates are steady at 5-7% .

Texas is a good example of data not supporting the fear mongering . Tests have increased nearly 4x in the last 1-2 months, increasing 20% on a 7 day avg. . Hospital  rate data shows plenty of capacity at 30%+ , and a 2-1x ventilator to patient ratio:   5844/2793.

Similar data found  in Arizona:  testing +2x in last 2 months , positives steady at 7%.

In all these states the daily mortality rate is trending 25-35% downward since peaking approximately 2 months ago. Alabama has been cited as a hotspot, it had only 1 death yesterday.

Data on the US is not fairly discussed, US is the 3rd most populous nation , China at #1 has unreliable data

On a  apples to apples basis, US has a lower death rate than many European nations in deaths per 1m population .

The US death rate is 35% lower , adjusted for nursing home deaths in NYC & NJ where infected Covid -19 elderly patients  were sent back to nursing homes in error , accelerating  deaths.

The US has the highest obesity rate at  over 30% , this is  among the highest in the world. Obesity is the highest  correlated morbidity factor , and the US, adjusted for high obesity and the nursing home error ,has one of the lowest death rates in the  western world per 1million , rivaling Germany & Austria.

Recent "outbreaks" in Germany are also not supported by data. China data is unreliable..

Thus, it appears any significant market correction induced by the current Covid-19 outbreak claims should be seen opportunistically.

 

references: 

https://txdshs.maps.arcgis.com/apps/opsdashboard/index.html#/0d8bdf9be927459d9cb11b9eaef6101f

https://azdhs.gov/preparedness/epidemiology-disease-control/infectious-disease-epidemiology/covid-19/dashboards/index.php?enowpopup

 https://ourworldindata.org/grapher/tests-per-confirmed-case-daily-smoothed?tab=chart&country=~USA

 

Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
This email address is being protected from spambots. You need JavaScript enabled to view it.

Tags: Director's LetterLatest Updates

 

The Big Kick-off: Sports Gaming Ready To Rumble

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The Big Kick-off: Sports Gaming Ready To Rumble

 

william hill reported strong online

(William Hill reported strong online wagering on Germany’s Bundesliga professional soccer league)

 

Gauging by lines of customers waiting outside casinos hours before reopening in Idaho, Arizona, California and Louisiana, recovery in the gaming industry may be stronger than economists are forecasting.


Sports bettors are emerging from their COVID-19 doldrums, grabbing action on the first weekend of Germany’s Bundesliga professional soccer league, which was second in online wagering only to the UFC 249 card in Florida, William Hill reported.


DraftKings (DKNG), William Hill (WIMHY) and Score Media and Gaming (SCR.V) experienced a slight uptick in share prices in May as gamblers turned to online sports betting platforms during the coronavirus quarantine period.


William Hill (WIMHY) offered drive-thru locations at five Nevada casinos for customers to create a mobile sports betting account in advance of the May 9 UFC event. One bettor put down $105,000 on favorite Tony Ferguson, who lost to Justin Gaethie in the main event.


“Ahead of the largest sporting event of the month, we wanted a safe way to meet the current demand from our customers,” CEO Joe Asher said. “It sure is nice to have an American sport to bet on.”


The bigger question: How will bettors react to pro and college sports without fans in the stands? Most analysts agree that sports wagering will lag previous highs until the leagues allow the return of spectators.


Resuming play

MLB: Wants to launch a shortened 82-game season in July with health and safety protocols in place, though negotiations with the players union over salary reductions linger as a complicated point of contention.


NFL: Taking similar steps to start practicing in July, including coronavirus testing for players and staff, social distancing measures in locker rooms, training rooms and weight rooms, and sanitizing all equipment.


NBA: Chose Orlando, Fla., to resume the season in July.

NHL: Approved a 24-team, conference-based playoff for the Stanley Cup.

NCAA: Lifted its moratorium on athletic activities as of June, though fall sports will not return without students on campus, NCAA President Mark Emmert said.


Going mobile

The online betting trend is expected to continue as states look to bolster depleted budgets, and gaming tax revenue could be a lucrative source.

Prior to the pandemic pause, New Jersey surpassed Nevada for the first time in sports betting revenue with $320 million in March, compared with $305 million for Nevada, less than two years after the U.S. Supreme Court’s repeal of the Professional and Amateur Sports Protection Act. Pennsylvania was third with $108 million.

New Jersey collected $39.4 million in sports betting taxes in March, compared with $20.6 million for Nevada, which has the lowest gaming tax rate in the nation at 6.75 percent.

Historically, sports have shown healing power in the aftermath of a crisis, and momentum gained by the repeal of PASPA will only feed America’s fever for betting on the games.

“As states look to fill budget gaps, sports betting and online gaming will likely creep into the conversation,” Steven Gallaway, managing partner of Global Market Advisors, said in a May report. “For those states that already have legalized sports, an increase in the tax rate should not be seen as a solution to fill a budget gap. In a high volume, low margin business, this would only hinder an already pressured market.”


Reopening casinos

Gaming stocks have tumbled this year. Some are climbing back as the economy reopens in phases and coronavirus data trends decline.

Wynn Resorts (WYNN), MGM Resorts (MGM), Las Vegas Sands (LVS), Caesars Entertainment (CZR) , Boyd Gaming (BYD) and Red Rock Resort (RRR) laid out plans to reopen casinos in early June, but it’s up to the Nevada Gaming Control Board and Gov. Steve Sisolak to give them the green light. The board meets May 26, and casinos could open June 4 under the next phase of relaxed restrictions.

Caesars (CZR) announced on May 21 that it will resume gaming and hospitality operations at its flagship Caesars Palace and Flamingo hotel in Las Vegas on the day specified by state officials. Its stock rose 11 cents to $11.12 on May 22.

“Reopening Las Vegas in a phased approach will be a significant milestone for Caesars Entertainment as the country continues to emerge from this necessary closure period,” said Tony Rodio, CEO of Caesars Entertainment. “We are hopeful that the country’s continued progress in addressing COVID-19 and business conditions will allow us to reopen more of our properties and bring back more of our colleagues as it is appropriate to do so.”

It will not be business as usual. There will be no live entertainment, bar service, spas, buffets, or valet parking. When those amenities are restored, they will be operated in a manner consistent with physical distancing guidelines. Other Caesars properties and dining amenities are expected to reopen based on customer demand.

Boyd Gaming in May reopened three Louisiana properties (Delta Downs Racetrack and Casino, Evangeline Downs Racetrack and Casino and Treasure Chest Casino) and two Mississippi properties (IP Casino Resort in Biloxi and Sam’s Town Hotel and Gambling Hall in Tunica).

 

Stock performance updates and recent news:

Our proprietary sports gaming index has been on a tear since the March market lows led by Penn Gaming (PENN) +600%, Full House Resorts (FLL) +565% and Eldorado Resorts (ERI) +450%. In fact, many of the casino/resort stocks are within striking distance of their pre-COVID-19 highs and may be fairly valued for now. Moreover, the group may be vulnerable to the Wall Street maxim “sell on the news” as the reopening of Las Vegas looks imminent on June 4.

 

 (Penn National Gaming)

penn daily

 

Several sports gaming only plays may have further to run.

 

(Draft Kings)  

draft king 5 2020

 

Draftkings Inc, (DKNG) is the reigning” King of the Hill” in publicly traded pure sports gambling plays measured in terms of market capitalization and revenues and boasts a breathtaking valuation of nearly 100 times its trailing 12-month revenues .Q1 2020 revenue rose as its online sports betting business went live in more states and it saw strength in iGaming business, such as online blackjack and roulette. QTRLY REVENUE GREW 30%, DESPITE COVID-19. Management has issued 2021 guidance reiteration for $700 million of revenue, an increase of over 30% from FY2020 estimates and doesn’t expect an impact to FY2021 revenues due to COVID-19. DKNG is now up ~44% from opening price since company’s Nasdaq debut on Apr 24. DKNG Reported q1 rev& eps misses of approximately 19%, but got a COVID-19 pass. The Street’s mean price target is $32, up about 12% from current levels. We would wait for a pull back for a more attractive entry point.

William Hill (WIMHY), may look like the better value on the surface but WIMHY derives only 8% of revenue from the fertile US sports gaming markets. Top line revenue growth is a tepid 6%.

We urge management to consider a spinoff of its faster growing US division to enhance shareholder value. The Street analysts’ mean upside estimate is approximately 12%.

Score Media and Gaming Inc. (SCR.V) is a Canadian-based company that seeks to leverage its position in sports info applications and partnership to operate online sports gambling with Penn Gaming (Penn) to attain rapid growth.

Score Media was temporarily granted a sports wagering vendor license for Indiana. Receipt of this temporary license is the first step of a multi-stage regulatory approval and licensing process that must be satisfied before the company can offer wagering in Indiana. SCR.V secured market access to offer mobile sports betting in Indiana due to its alliance with Penn National Gaming (PENN) and anticipates launching theScore.Bet later this year.

Canadian banking firms have a price target of .93( cdn), approximately 50% above current levels. The company has disappointed on revenue growth over the last two consecutive quarters, missing estimates.

 

(Singular Research Sports Gaming index)

gaming index 5 2020

 

Visit us for a complimentary research report at SingularResearch.com

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818-222-6234

 

Singular Research Director’s Letter: April performance 2020

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Singular Research’s April 2020 Director’s Letter

 

 In April, there was progress in the fight against the Corona virus as social distancing and quarantine measures appeared to have slowed new cases and deaths.  Gilead’s Remdesivir brought new hope to Corona virus patients and the stock market as initial trials reduced hospitalization and mortality rates.  Many Americans received their $1,200 stimulus check and the U.S. central bank bought $30 billion per day in Treasuries.  The Small Business Administration’s (SBA) first round of loans totaling $342 billion dried up halfway through the month.  Later in the month, the House approved another round of loans totaling $310 billion.  With the stock market rallying, state economies re-opening, and strong progress being made on the fight against the Corona virus, many believe the worst may be over.

The April Purchasing Managers Index (PMI®) was still in contraction territory, registering 41.5 percent, a decrease of 7.6 percentage points from the March reading of 49.1 percent.  Similarly, the Conference Board Leading Economic Index® (LEI) for the U.S. declined 6.7 percent in March to 104.2 (2016 = 100), following a 0.2 percent decrease in February and a 0.4 percent increase in January.  The LEI decline of 6.7 percent was the largest decline in the index’s 60-year history.  The unemployment rate rose to 14.7% (4.4% in March), as workers were furloughed and businesses closed.

 

For the month of April, the Singular coverage list outperformed the S&P 500 and the Russell 2000 by 130 and 32 basis points, respectively.  Year-to-date, the Singular coverage list has outperformed the Russell 2000 by 405 basis points and underperformed the S&P 500 by 733 basis points, respectively.  As progress is being made in the fight against the Corona virus, markets rebounded significantly from March lows.  Investors displayed enthusiasm over industries such as telecommunications and technology that could weather the Corona virus storm better than others.

april 2020 top 5 performance

 

SA was our top performer in April as gold prices increase in inflationary times.  Gold is also viewed as a haven in times of uncertainty.  BYND also did well as meat processing plants had supply chain issues, leading consumers to buy more plant-based meat as an alternative.  CMTL, ROKU, and RUBI all experienced increased usage of their products while consumers remained in quarantine.

april 2020 worst 5 performers

EHTH was our worst performer for the month as investors worried over the negative effects the Corona virus may have on health insurers; however, the company reported record earnings in April which has led to a strong rebound of EHTH’s stock price in the month of May.  ZEUS and DAKT were roughly eight percent lower as demand for their products have recently come into question.  With large gatherings and sporting events currently on hold, demand for DAKT’s score boards have decreased.  Furthermore, as oil prices cratered in April, investors became wary of the demand and usage of GEOS’s ocean bottom discovery technology for oil deposits. 

For April, we initiated a short position on Zoom Video Communications, Inc. (ZM).  Zoom Video Communications provides a cloud-based video communication platform for enterprises. The company's platform enables face-to-face video experiences and connects users across various devices and locations in a single meeting.

april 2020 new initiation

 

We wish to thank our clients for their support and belief in our process.  To learn more about Singular Research and register for a 14-day trial offer, please follow the link below.  

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Thank You

Robert Maltbie, CFA
Singular Research, President
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Sports Gaming – Primed to Lead on the Road to Recovery

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las vegas

Normally bustling with traffic, the Las Vegas Strip remains closed with a heavy police presence on a Friday night.

 

Las Vegas casinos are closed, secured by barricades and heavily guarded by police, the vibrant buzz of the world-famous Strip quashed by Gov. Steve Sisolak’s order to shut down all gaming activity on March 17.

On April 30, he laid out a “Roadmap to Recovery” that extended the shutdown through May. Phase one allows the reopening of some businesses on May 15, but does not include casinos, bars or nightclubs.

Sisolak gave no definitive date for resuming those businesses, nor did he provide details on subsequent phases.

According to national polls, roughly two-thirds of Americans believe it’s too early to reopen businesses at the risk of bringing on a second wave of coronavirus infections and deaths. Online sports gaming faces no such handicap.

However, protesters are pushing back across the nation, and at least 30 states have opened businesses adhering to health guidelines and capacity restrictions. Some business owners are reopening without permission, prepared for legal action if necessary.

It’s past time to get people back to work and proceed cautiously with ramping up the economy, says Las Vegas Mayor Carolyn Goodman.

 

Lockdown called ‘Total insanity’

The mayor ignited a storm of media backlash and public criticism when she labeled Gov. Sisolak’s protracted lockdown of all nonessential businesses, including Strip hotels and casinos, as “total insanity.”

Her interview with CNN’s Anderson Cooper went viral when she mentioned that “we’ve had viruses for years,” while thousands of Las Vegans cruised the Strip two days after the interview in support of the mayor’s call to restart the economy.

Nevada’s Assembly Republican Caucus urged Gov. Sisolak to start the process of reopening the economy. But he has remained recalcitrant, pledging to delay re-opening the casinos until the phase three or four, at the tail end of his plan, indicated to be late May or even into June. MGM resorts (MGM) is studying a plan to hosting the re-start of the NBA season at its various properties, a potential catalyst to accelerate sports gaming.

 

Chomping at the bet

With NBA and MLB seasons suspended and uncertainty about the NFL, pent-up demand for sports gambling is undeniable. The sentiment is that gamblers are eager to return to their favorite sports book or betting app.

Prior to mass disruption in the national economy, online sports gaming leader, Score Media and Gaming (SCR.V) saw “great momentum” across its core operations, Chairman and CEO John Levi said in his second-quarter earnings conference call.

In sports betting, the company achieved quarter-over-quarter growth in both gaming handle and gross gaming revenues with increases of 58% and 83%, respectively, and further enhanced development of theScore Bet media and gaming platform.

Score secured market access to operate in Colorado through an agreement with a subsidiary of U.S. gaming operator, Jacobs Entertainment, and remains on track to launch theScore Bet in both Colorado and Indiana later this year, subject to receiving licenses and approvals.

“We continue to strategically pursue market access opportunities across the U.S. and offer our support to legislative efforts to progress sports betting, both in the U.S. and in Canada where possible,” Levi said.

Score also finalized a deal to become an authorized sports betting operator of the NBA, providing access to official NBA betting data and related marketing rights for theScore Bet.

In late April, International Gaming Technology (IGT) signed an agreement to power Circa Sports’ PlaySports mobile sports betting app in Colorado. That followed Circa’s launch plans for the app earlier in the year in partnership with Century Casinos (CNTY).

“We look forward to introducing patrons and sports fans in Colorado to the excitement of Vegas-style sports betting through the Circa Sports Colorado app,” said Derek Stevens, CEO of Nevada-based Circa Sports.

DraftKings, (DKNG) went public in April and stock immediately jumped 10 percent, giving the Boston-based sports betting platform a market value of more than $6 billion. Morgan Stanley projected 31 percent revenue growth through 2025.

While 14 states have legalized sports betting since 2018, we believe at least 10 more will follow in the aftermath of COVID-19, which has severely depleted state budgets and reduced tax revenue. The online sports gambling hold is expected to grow from $1.5 billion in 2019 to $12 billion in 2025, thus increasing the appeal to mega resorts such as MGM Resorts International (MGM) and Caesars Entertainment Corp. (CZR).

League officials are discussing how best to resume play, possibly restricting games to geographic regions and limiting attendance. NBA Commissioner Adam Silver said the league is “not in a position to make any decisions, and it’s unclear when we will be.”

MLB officials, team owners and players are optimistic about starting the baseball season this year, though games could be played in front of empty stadiums.

 

Release the data

Las Vegas Mayor Goodman wants available data from every major city in the world to be examined to determine the safest path to reopening.

Though Nevada health officials won’t share the methodology that justifies the governor’s shutdown, the initial goal of “flattening the curve” for coronavirus cases is being accomplished in key areas such as New York City and New Jersey.

By objective standards using moving averages to smooth out spikes, Nevada should be removing its stay-at-home order. New coronavirus cases per million population have shown a downward trajectory since early April, and death rates have declined for more than 14 days.

Now we have a harder goal to define: widespread testing.

“The conundrum of the asymptomatic poses a significant fly in the ointment for any regime of testing, particularly since there are no known vaccines yet discovered to cure any corona viruses and the concept of herd immunity is being disputed for eliminating COVID-19,” said Robert Maltbie, CFA and president of Singular Research. With the public and the “science” opposing a rapid reopening of the physical resorts and casinos, online gaming looks primed to breakout first.

 

casino open 2020

 

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Singular Research Staff
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