Red Rock Bonds Enticing on Las Vegas Casino Strength, Says Research Firm

• Red Rock corporate bonds are supported by strength in the Las Vegas locals segment
• Research firm highlights North Fork management accord as potential catalyst

Shares of Red Rock Resorts (NASDAQ: RRR) are higher by nearly 35% year to date, easily good for one of the best showings among casino equities, but some experts believe the company’s corporate debt offers opportunity as well.

In a new report, GimmeCredit’s Kim Noland notes vibrancy in the Las Vegas locals market — Red Rock’s point of emphasis — expansion plans, and a management accord with a California tribal casinos as being among the positive attributes supporting the outlook for the operator’s bonds.

Red Rock has a pipeline of new projects in the area along with considerable land assets. The projects are largely insulated from new supply but the capex to complete development is significant,” observes Noland.

Those projects include expansion at the Durango Casino & Resort in Southwest Las Vegas, enhancements at Green Valley Ranch in Henderson, and improvements at Sunset Station. For creditors, it’s noteworthy that Red Rock recently trimmed its 2025 capital spending forecast by $25 million, though Noland points out significant debt reduction is unlikely this year.

More Factors Supporting Red Rock Bonds

In addition to the reduced spending outlook, there are other tailwinds supporting Red Rock bonds, including the fact that each of the aforementioned projects is on time and on budget.

“In the recent second quarter, Red Rock benefited from increased play from most segments of its customer base, including core regional customers, national customers, and transient players, plus some drive-in business from Strip ‘trade-down’ value-oriented gamers,” adds Noland. “While the impact from Durango on comparisons has abated somewhat, consolidated revenue increased 8.2% to $526 million. Administration tax policies on tips, overtime, and a senior citizen tax deduction will continue to assist the companyʼs core customers in the locals market.”

Noland has an “outperform” rating on the Red Rock bonds maturing in 2031, which currently sport a yield-to-worst of 5.75%.

North Fork a Red Rock Catalyst, Too

All of Red Rock’s casinos are in the Las Vegas Valley, but it has an agreement in place to run the North Fork Mono Casino & Resort in Madera, Calif. — a $400 million tribal gaming venue scheduled to open next year.

“The North Fork project will provide substantial management fees, and the other expansion projects underway will also serve to increase cash flow, dependent on the health of the ‘locals’ consumer economy,” concludes Noland.