Posted on: October 17, 2023, 03:30h.
Last updated on: October 17, 2023, 03:30h.
Small-cap gaming stocks are underperforming compared to large-cap stocks in the market this year. However, this has resulted in significant valuation discrepancies, presenting great value opportunities in smaller gaming equities. Analyst David Bain from B. Riley has identified seven undervalued stocks in the gaming industry.
Bain highlighted casino operators and slot machine manufacturers as part of the undervalued small-cap gaming stocks. Among them are Century Casinos (NASDAQ: CNTY) and Full House Resorts (NASDAQ: FLL).
Full House Resorts’ Temporary at American Place in Waukegan, Ill. is gaining market share and has future catalysts such as fine dining options and an extended operation period for the Circa sportsbook, which brings in guaranteed annual income. Additionally, Full House will open its Chamonix casino hotel in Colorado in December, and the operator is realizing cost savings at other venues.
Century Casinos has recently seen a decline in its stock price, potentially due to investors not recognizing the value of recent additions to the operator’s portfolio. However, Century’s balance sheet is strong, and its shares are attractively priced.
Bain noted, “These positives combine with a low CY24E EV/EBITDA valuation. Earning growth catalysts are underway and offer multiple years of growth visibility. CNTY has already benefited from certain property improvements and is mining synergies at the newly acquired Rocky Gap (Maryland) and the Nugget (Reno).”
Golden Entertainment (NASDAQ: GDEN), the operator of The Strat, is another undervalued small-cap gaming stock. Bain argues that the investment community is not fully considering the value of Golden’s real estate holdings in the share price.
The company owns all the land on which its casinos are located, as well as additional undeveloped property, including land on the Las Vegas Strip. If Golden decides to sell its real estate assets in the future, it could generate significant value for shareholders.
Bain’s report explores a hypothetical scenario in which Golden could sell its currently occupied and unused land for more than $1.6 billion. After factoring in taxes and debt, Golden could profit close to its market capitalization of $992 million.