Century Casinos (NASDAQ:CNTY) inventory tumbled on Tuesday after the regional on line casino operator delivered estimate-lagging fourth-quarter outcomes. However some analysts are defending the shares, saying the pullback might be a shopping for alternative.
The gaming ground on the Nugget On line casino in Reno. Shopping for that venue is a catalyst for Century Casinos, says an analyst. (Picture: Nugget On line casino)
In a be aware to purchasers, B. Riley analyst David Bain reiterates a “purchase” ranking on Century, with a $24 worth goal. That’s greater than double the place the inventory closed on March 9. His thesis on the gaming fairness is easy: The shares are cheap and supply important upside.
We proceed to imagine CNTY is staged for important, ahead inventory a number of growth providing potential sturdy share worth upside. CNTY trades for five.0x/4.2x CY23E/CY24E enterprise worth/earnings earlier than curiosity, taxes, depreciation, amortization (EBITDA), a 41%/44% low cost to friends,” mentioned Bain.
The analyst provides the selloff in Century shares could also be a case of traders overreacting to the corporate lacking consensus fourth-quarter forecasts. Bain factors out among the estimates included within the mixture Wall Road outlook have been “stale,” and didn’t account for disruptions attributable to the omicron variant of the coronavirus and associated softness within the operator’s Canadian enterprise.
Century Casinos Alternative Beckons
Final month, Century mentioned it’s paying $195 million for the Nugget Sparks on line casino and a 50 % curiosity in the actual property firm that owns the gaming venue. That’s offering the operator with an entry into Nevada. Bain views that transfer as a profit for Century traders.
“We might use the share sell-off as a shopping for alternative, and anticipate consensus estimates to maneuver increased this morning, as just a few had included CNTY’s newest acquisition in Reno to forecasts heading into yesterday’s 4Q21 earnings launch,” he mentioned.
Whereas Reno lacks the glamour and income heft of Las Vegas, that a part of Northern Nevada is quickly rising. It’s supported by an inflow of Fortune 500 corporations and Californians fleeing that state’s onerous taxes. Broadly talking, analysts are bullish on on line casino operators with Reno/Lake Tahoe publicity due to the market’s favorable demographic developments.
When the Nugget Sparks deal closes, Century will run 10 gaming venues in North America, together with Canada, Colorado, Missouri, Nevada, and West Virginia. The property transaction is slated to shut within the second quarter, with the operational deal following a yr later.
Reno Provides to Earnings
Corporations’ acquisitions are judged by whether or not these purchases add to the underside line, and it seems Century’s Nugget purchase will verify that field for traders.
CNTY ought to shut its 50% buy of the Nugget property subsequent month, instantly leading to an extra ~$1.9M EBITDA per quarter paid to it in hire till it receives a Nevada gaming license early subsequent yr, when it can take over operations of the Nugget, which generated ~$33M CY21A EBITDA,” provides Bain. “We forecast ~$5M of extra EBITDA progress and associated acquisition synergies starting 2Q23.”
Citing a possible rebound in conference enterprise, live shows, $90 million price of property enhancements, alterations to the gaming ground and improved advertising, amongst different elements, Century administration signifies present forecasts for Nugget advantages may show conservative.
