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Post Date: April 10, 2020, 5:03 a.m.
Updated on April 10, 2024 at 05:03am.
Century Casinos’ (NASDAQ: CNTY), shares fell Wednesday along with other gaming stocks as the Consumer Price Index for March was higher than forecast. The reading indicates inflation will be more persistent that economists expected.
This concern about economic data obscured some good news regarding Century. Macquarie’s Chad Beynon updated the stock of regional casinos to “outperform”, from “neutral,” while maintaining its $5 price target. This implies a gain of 53% over today’s $3.27 closing price.
Beynon stated that the sale of the shares, which have seen them shed 32% from the end last year whilst the Russell 2000 Index It is not enough to say that the increase is 2%.
The OpCos’ multiples fell 1.3x to 5.4x in the past 18-months (OpCos are down about 30%), while WholeCos’ multiples remain flat at 8.9x. (WholeCos are up by approximately 30%). Meanwhile, CNTY shares traded down from 4.8x to 3.6x (stock down 50%), the cheapest OpCo in our coverage universe (vs S&P 500 +38% and Russell 2K +17%),” wrote Beynon.
Century, because it does own some of the land on which its gaming facilities are situated, is a operating company.
Century Casinos Rebound: Catalysts are everywhere
The stock market is currently in a slump, and there are increasing concerns that Century, a story for 2025This could mean that investors will have to take their time with a name.
Beynon said that patience would be rewarded as the operator may generate EBITDA of $168m on revenues of $700m next year. With that comes the possibility that the operator could notch 85 cents a share in free cash flow — an impressive sum for a company with a $101 million market capitalization and a $3.27 share price.
Beynon sees Century’s two Missouri casinos The Maryland and Reno locations could be catalysts to the share price.
There are several near-term drivers, such as The Riverview’s opening on April 4, Poland’s license renewal (which is currently generating $6m in EBITDA per year compared to $12m previously) and the completion of Caruthersville (fourth quarter of 24). We are also celebrating the anniversary of the Rocky Gap takeover (July 2023) and Nugget’s acquisition (April 2023), both of which were a learning experience.
Century Casinos has Growth and Value traits
Century had a leverage ratio of 4.9x at the end last year. This is expected to increase to 5.6x this year as a result of the Missouri plan and the efforts of the operator to expand Rocky Gap and Nugget. Beynon noted that the leverage ratio may fall to 4.8x, “which would be the biggest one-year decline in our coverage”.
Investors could gain confidence by reducing debt, as well as by executing at Maryland and Reno. These properties are seen as being integral to the company’s long-term strategy.
“CNTY represents a value/growth tale with two renovations projects which we think will yield a return in the mid teens on an $82mn investment. Beynon concluded that the Nugget, Rocky Gap and Rocky Gap purchases should all contribute to medium-term growth.
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