Monarch On line casino & Resort (NASDAQ: MCRI) delivered fourth-quarter outcomes late Wednesday. One of many extra attention-grabbing tidbits to emerge could possibly be the corporate signaling a willingness to think about mergers and acquisitions.
Monarch On line casino & Resort’s Atlantis in Reno, Nev., seen above. The operator is open to mergers and acquisitions. (Picture: YouTube)
At the moment, the Reno-based regional on line casino operator owns simply two gaming venues — Atlantis in its dwelling metropolis, and a namesake property in Black Hawk, Colo. For a way lengthy Monarch’s roster stays that means stays to be seen. However CEO John Farahi says the corporate has the sources to think about consolidation alternatives.
Our robust stability sheet and free money move permits us to proceed to put money into our current operations, whereas we pursue potential M&A alternatives,” he mentioned in an announcement.
Monarch has $30 million in money within the financial institution, and final week flexed its cash-flow era muscle groups by saying a one-time money dividend of $5 per share and a brand new quarterly payout of 30 cents.
Monarch May Be Aggressive in M&A Pursuit
Within the assertion, Farahi didn’t get into specifics concerning Monarch’s consolidation technique. However it’s clear the operator is taking a proactive method on that entrance.
“We’re actively evaluating potential acquisitions, and we’re ready to maneuver aggressively for the fitting alternative,” added the chief government officer.
With its Colorado property ramping up and enhancements at Atlantis in Reno anticipated to pay dividends, Monarch is able to proceed bolstering its stability sheet. That may pave the best way for buying different casinos with out weighing on the client’s debt discount plans.
“With the perfect stability sheet within the area and free money move (FCF) ramping to $100m+ in 2023E (Macquarie estimate), or a 7% FCF yield, we’d count on MCRI management to take care of an opportunistic view on development by way of M&A. We estimate MCRI might purchase $100m of earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) at present accretive valuation ranges and nonetheless preserve sub 4x leverage,” wrote Macquarie analyst Chad Beynon in a be aware to purchasers.
Moreover, Monarch absolutely owns the true property on which its two on line casino accommodations reside, indicating that it might increase money for an acquisition by promoting a kind of properties. Nonetheless, the operator didn’t point out that may be a technique into account.
Climate May Be Think about Monarch M&A Plans
As Stifel analyst Jeffrey Stantial famous in a report, Monarch administration talked about dangerous climate as a slight hindrance to efficiency at Atlantis within the fourth quarter. That’s additionally a problem that might rear its head in Colorado.
To that finish, it’s potential Monarch might consider acquisitions in areas of the US the place snow isn’t an element. However the operator didn’t communicate to geographic preferences.
Stifel’s Stantial added that whereas Monarch is extra possible a purchaser, it might probably be a vendor. If the corporate doesn’t discover enticing offers, it might ship extra particular dividends to shareholders.
