Century, Golden Entertainment Among Best Regional Casino Cash Flow Stories, Says Analyst
In what’s been a trying come out to 2022 for the broader gaming equities complex, some regional cassino operators are standing out, and they have something inward common: Ability to bring forth unloose cash flow (FCF).
Operators with sturdy equilibrium sheets and telling FCF-generating capabilities include Century Casinos (NASDAQ:CNTY) and Golden Entertainment (NASDAQ:GDEN). In a observe to clients today, Roth Capital psychoanalyst Edward Engel highlights that pair off of regional cassino equities, among others.
Regional gaming stocks with attractive FCF yields have been relation outperformers inwards 2022, and we wait this outperformance to go along amid an uncertain macro instruction environment,” said the analyst.
Engel notes that the stream clime isn’t like to the second-half of 2018, when gaming equities tumbled amid investors’ fears of rising interest group rates. This time around, investors likely realize the up revenue gaming revenue (GGR) story offered past regional operators, and the potential for 2022 GGR data to surprisal to the upside, he adds.
Century, Golden Among Cream of FCF Crop
Engel has “buy” ratings on Colorado-based Century and Strat proprietor Golden Entertainment. The former sports an FCF bear of 15% — 20% excluding chapiter spending — piece the latter yields a clean up 12% on an FCF basis.
In February, Century said it’s paying $195 one thousand thousand for the Nugget Sparks casino and a 50% stake inward the existent land troupe that owns the gaming venue. That’s providing the manipulator with an entry into Nevada, and the run is mostly praised by analysts.
For its part, Golden is an telling FCF/shareholder rewards story. On its stream free people immediate payment flux trajectory, it’s possible Golden will bring forth around $200 million inwards hard cash this twelvemonth — to a greater extent than 10% of its securities industry capitalisation — for percentage repurchases. In the final triplet months of 2021, the cassino manipulator bought plump for $10.6 million of its stock. The bulk of Golden’s portfolio are Battle Born State casinos frequented by locals, and the manipulator has no more near-term new projection risk.
“Another key difference vs 2H18 is financial leverage, where both balance sheets and FCF profiles get improved materially. Prior to the pandemic, 4-5x mesh debt to EBITDA was considered ‘normal’, but leveraging profiles have now moderated to 2-3x,” adds Engel. “Meanwhile, several operators, such as GDEN, are at present harvesting FCF after major CapEx initiatives shoemaker's last decade.”
Cautious on Penn
Penn National Gaming (NASDAQ:PENN) is the largest regional gambling casino operator inward the US. Its land-based gaming trading operations are expected to generate a liberate hard currency afford of 11%. But Engel is cautious on the name.
The analyst lowers his price direct on William Penn to $46 from $51 with a “neutral” grade, implying only if small upside from the Apr 1 confining around $42. He says that mark includes $20 of economic value ascribed to the operator’s online business.
He also reiterates a “buy” rating on Full House Resorts (NASDAQ:FLL), with a $16 price forecast. That’s more than 60% supra electric current levels.
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