Regional On line casino Shares Century, Golden Provide Strong FCF, Says Analyst

Posted on: April 4, 2022, 09:01h.

Final up to date on: April 4, 2022, 09:01h.

In what’s been a making an attempt begin to 2022 for the broader gaming equities complicated, some regional on line casino operators are standing out they usually have one thing in frequent: Capability to generate free money move (FCF).

regional casino
Golden Leisure’s Strat Las Vegas. An analyst likes the operators free money move potential. (Picture: Twitter)

Operators with sturdy stability sheets and spectacular FCF-generating capabilities embody Century Casinos (NASDAQ:CNTY) and Golden Leisure (NASDAQ:GDEN). In a observe to shoppers at this time, Roth Capital analyst Edward Engel highlights that pair of regional on line casino equities, amongst others.

Regional gaming shares with enticing FCF yields have been relative outperformers in 2022, and we anticipate this outperformance to proceed amid an unsure macro setting,” mentioned the analyst.

Engel notes that the present local weather isn’t similar to the second-half of 2018 when gaming equities tumbled amid buyers’ fears of rising rates of interest. This time round, buyers probably perceive the bettering gross gaming income (GGR) story supplied by regional operators and the potential for 2022 GGR information to shock to the upside, he provides.

Century, Golden Amongst Cream of FCF Crop

Engel has “purchase” scores on Colorado-based Century and Strat proprietor Golden Leisure. The previous sports activities an FCF yield of 15 p.c — 20 p.c excluding capital spending — whereas the latter yields a tidy 12 p.c on an FCF foundation.

In February, Century mentioned it’s paying $195 million for the Nugget Sparks on line casino and a 50 p.c curiosity in the true property firm that owns the gaming venue. That’s offering the operator with an entry into Nevada and the transfer is essentially praised by analysts.

For its half, Golden is a formidable FCF/shareholder rewards story. On its present free money move trajectory, it’s attainable Golden will generate roughly $200 million in money this 12 months — greater than 10% of its market capitalization — for share repurchases. Within the last three months of 2021, the on line casino operator purchased again $10.6 million of its inventory. The majority of Golden’s portfolio are Nevada casinos frequented by locals and the operator has no near-term new undertaking danger.

“One other key distinction vs 2H18 is monetary leverage, the place each stability sheets and FCF profiles have improved materially. Previous to the pandemic, 4-5x internet debt to EBITDA was thought-about ‘regular’, however leverage profiles have now moderated to 2-3x,” provides Engel. “In the meantime, a number of operators reminiscent of GDEN are actually harvesting FCF after main CapEx initiatives final decade.”

Cautious on Penn

Penn Nationwide Gaming (NASDAQ:PENN) is the most important regional on line casino operator within the US and its land-based gaming operations are anticipated to generate a free money yield of 11 p.c, however Engel is cautious on the identify.

The analyst lowers his value goal on Penn to $46 from $51 with a “impartial” grade, implying solely modest upside from the April 1 shut round $42. He says that focus on consists of $20 of worth ascribed to the operator’s on-line enterprise.

He additionally reiterates a “purchase” ranking on Full Home Resorts (NASDAQ:FLL) with a $16 value forecast. That’s greater than 60 p.c above present ranges.

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