Posted on: October 24, 2024, 01:43h.
Last updated on: October 24, 2024, 01:43h.
Churchill Downs (NASDAQ: CHDN) announced a plan to invest up to $50 million in constructing a new historical racing machine (HRM) facility in Calvert City, Ky.
The gaming company estimates expenses of $40 million to $50 million on the HRM facility, which is considered an extension of Oak Grove Racing, Gaming and Hotel.
Churchill Downs plans to launch the new 23,000 square-foot venue with 250 HRMs, a sports bar, a sportsbook, and a simulcast center in early 2026,” according to a statement from the Kentucky-based gaming operator.
The company revealed that the HHR facility will be its eighth in Kentucky, and the announcement was made alongside Churchill’s third-quarter earnings report.
Churchill Downs Positive Outlook on New HRM Property
Churchill Downs operates HHR venues in Kentucky and Virginia and is optimistic about the long-term potential of the upcoming Calvert City location.
“Calvert City is an ideal location for our eighth HRM venue in Kentucky, with a population of 300,000 within a 60-minute drive and near the convergence of two Interstates for easy customer access from surrounding cities in Southwestern Kentucky,” said CEO Bill Carstanjen in a recent conference call with analysts. “We believe this will be a valuable addition to our portfolio of HRM assets.”
The new HHR property also showcases Churchill leveraging its $250 million acquisition of Exacta Systems in December 2022, a Florida-based provider of HHR systems and gaming machines.
“We are targeting an opening in early 2026. HRMs and Exacta’s HRM technology are key strategic focuses for our company over the next five to 10 years. These investments offer high growth and margins, providing excellent returns for our shareholders,” added Carstanjen.
HRMs Critical Component of Churchill Downs Growth Strategy
In addition to its Kentucky racetrack and the Kentucky Derby, Churchill Downs operates regional casinos and numerous HRM venues, all crucial drivers of the operator’s long-term growth.
In the third quarter, Churchill’s seven HHR venues in Virginia exceeded revenue expectations, according to Stifel analyst Jeffrey Stantial. He highlighted that the Calvert City location and HRM expansion in Virginia are not yet factored into the firm’s estimates for the gaming company.
The analyst also noted that “sequential growth in high-margin Exacta revenues” could propel shares in the future. Churchill Downs’ stock has risen by 3.15% year-to-date, with a recent 5.65% gain in the past month.
Stantial recommends buying the stock with a $164 price target, indicating nearly 18% upside from current levels.