Shares of Century Casinos (NASDAQ: CNTY) joined the broader gaming fairness complicated to the draw back Wednesday because the March studying of the Client Worth Index (CPI) got here in greater than anticipated, indicating inflation is proving extra persistent than economists hoped.
Rocky Hole On line casino Resort in Maryland. An analyst believes the selloff in operator Century Casinos is overdone. (Picture: Oregon Stay)
That regarding financial knowledge level obfuscated some optimistic information pertaining to Century. In a brand new report back to shoppers on Wednesday, Macquarie analyst Chad Beynon upgraded the regional on line casino inventory to “outperform” from “impartial” whereas sustaining a $5 value goal. That suggests upside of virtually 53% from Wednesday’s closing value of $3.27.
Beynon stated the sell-off within the inventory, which has seen it shed 32% because the finish of final 12 months whereas the Russell 2000 Index is up 2% over that point, is overdone.
Prior to now 18 months, OpCos have traded down 1.3x turns to five.4x (OpCos down ~30%), whereas WholeCo multiples remained flat at 8.9x (WholeCos up 30%). In the meantime, CNTY shares traded down from 4.8x to three.6x (inventory down 50%), the most cost effective OpCo in our protection universe (vs S&P 500 +38% and Russell 2K +17%),” wrote Beynon.
As a result of it doesn’t personal the entire actual property on which its gaming venues reside, Century is taken into account an working firm (OpCo).
Catalysts Abound for Century Casinos Rebound
With the inventory at present struggling, there’s growing perception that Century is a 2025 story, indicating traders could must be affected person with the identify.
That persistence may very well be rewarded as a result of the operator may generate earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) of $168 million on income of $700 million subsequent 12 months, based on Beynon. With that comes the likelihood that the operator may notch 85 cents a share in free money movement — a formidable sum for an organization with a $101 million market capitalization and a $3.27 share value.
Beynon sees Century’s pair of Missouri casinos in addition to its Maryland and Reno venues appearing as potential catalysts for the shares.
“A number of near-term catalysts, together with The Riverview opening (April 4), Poland re-licensing (at present run-rating ~$6m of EBITDA vs ~ $12m prior), and completion of Caruthersville (4Q24). Furthermore, we now anniversary the takeovers of Rocky Hole (July 2023) and Nugget (April 2023), which had some preliminary learnings,” noticed the analyst.
Century Casinos Has Progress, Worth Traits
On the finish of final 12 months, Century’s leverage stood at 4.9x, however that’s anticipated to leap to five.6x by the tip of this 12 months as a result of operator’s Missouri plans and efforts to ramp up the Nugget and Rocky Hole. Nonetheless, that leverage ratio may decline to 4.8x “marking the biggest one-year deleveraging in our protection,” famous Beynon.
Decreasing debt may foster confidence amongst traders as may strong execution on the Maryland and Reno properties, that are considered as integral to the long-term thesis on the inventory.
“CNTY is a singular worth/development story with two renovation tasks that we imagine will earn a mid-teens return on $82mn spend. As well as, the Nugget and Rocky Hole acquisitions ought to additional drive medium-term development,” concluded Beynon.
