Century Casinos (NASDAQ:CNTY) is gaining favor among analysts, as the company turns its focus to the US and looks to rid itself of a lagging UK property.
Entering 2019, the company had just two US venues – a pair of eponymous properties in its home state of Colorado – but that number has more than doubled to five with the recent additions of the Mountaineer Casino Racetrack and Resort in West Virginia, and the Isle Casino Cape Girardeau and Lady Luck Casino, both in Missouri. Century partnered with Vici Properties (NYSE:VICI) to acquire those casinos from Eldorado Resorts (NASDAQ:ERI) for $385 million. That transaction closed in December.
Although those are new additions to Century’s portfolio, those properties are already topping expectations, prompting some analysts to take a bullish view of the regional gaming company’s stock.
We see calendar year 2020 upward consensus estimate revisions driven by better than forecast trends at recently acquired properties; a near-term divestment of its U.K. casino (currently a drag on earnings before interest, taxes, depreciation and amortization (EBITDA)); and the incorporation of multi-year Colorado sports wagering license minimum guarantee deal,” said Roth Capital analyst David Bain in a note provided to Casino.org.
The analyst noted he recently met with Century Chairman and Co-CEO Peter Hoetzinger, bolstering Roth’s “conviction for near- and long-term share price appreciation.”
Because of some adjustments made by Century management, including removing some slumping slot machines and reconfiguring table games, at the venues purchased from Eldorado, those acquisitions are already paying off.
“In January, Isle Cape Girardeau, Lady Luck Caruthersville and Mountaineer gross gaming revenue was +6%, +16% and +10%, respectively,” said Bain. “January results compare to our CY20 forecast of +3%/+3% revenue/EBITDA growth for all three properties.”
Century could also efficiently boost earnings by selling or closing its Bath, England casino, which is under-performing and creating a $2.5 million EBITDA headwind.
Closer to home, Century recently inked a deal with Circa Sports for internet and mobile sports betting in Colorado. The Centennial State is expected to have sports wagering up and running on May 1.
“CNTY has negotiated one of its sports licenses(Circa Sports) and is in the process of negotiating its two others,” said Bain. “Combined, we believe CNTY will negotiate ~$3mm of ongoing minimum guarantees to add to its ~$8mm TTM CO EBITDA, with its first sports wagering renumeration beginning in May, when CO sports wagering goes live.”
After digesting the aforementioned ERI purchases, Century management has mentioned it could consider other deals later this year. But even if attractive acquisition opportunities don’t arise, the company has other outlets for capital deployment.
“Should CNTY not find an acceptable domestic acquisition within the next six to nine months, we believe it will look to return capital to shareholders in the form of share repurchase,” notes Bain.
The analyst has a “buy” rating and $14 price target on the name, well above the Wall Street consensus of $12.30.