On Friday, shares of Full House Resorts (NASDAQ: FLL) experienced a notable surge following the regional casino operator’s encouraging second-quarter performance. The company provided important updates to analysts and investors regarding its flagship properties, American Place and Chamonix.
Although Full House has yet to finalize essential financing for the future American Place Casino in Waukegan, Illinois, analysts like David Bain from Texas Capital Securities acknowledge the company’s openness regarding its financial status. He emphasizes that Full House has received regulatory approval to continue its temporary operations until February 2029, with plans to launch the permanent facility by the third quarter of 2028. There is potential for Full House to engage a real estate investment trust (REIT) to secure the remainder of the financing needed.
“It’s possible that FLL’s financing for the permanent AP could incorporate a REIT structure,” Bain noted in his communication to clients. “If this materializes, our calculations suggest that the anticipated rent payments, when multiplied by eight for lease debt purposes, alongside recent operational transaction valuations, would justify our $6 price target as both reasonable and conservative.”
The performance of the temporary venue hasn’t impeded results at American Place. Full House President and CFO Lewis Fanger highlighted that the property “achieved its best quarterly performance to date,” showing revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 13.4% and 13.8%, respectively.
Bain underscores that securing financing for the Illinois casino hotel is crucial for accurately assessing Full House’s stock value, pinpointing factors such as refinancing existing bonds, funding the construction of the permanent American Place, and establishing a new revolving credit facility. An announcement regarding a financing deal might unfold within this quarter.
No Urgency for Acquisitions at Full House Resorts
Recently, Churchill Downs (NASDAQ: CHDN) disclosed intentions to divest nine regional casinos, and additional non-destination gaming venues are expected to enter the market as a result of ongoing industry consolidation. However, Full House is not in a hurry to explore acquisition opportunities.
During a conference call, CEO Dan Lee explained that the company is concentrating on securing funding for the permanent version of American Place while stabilizing operations at the Chamonix Casino Hotel in Cripple Creek, Colorado.
“Taking on another project isn’t a priority for us,” Lee remarked in response to a question from analyst Chad Beynon at Macquarie. “If a compelling, budget-friendly offer comes our way, we’d certainly assess it. However, we must consider our current financial commitments as we are quite leveraged.”
Lee also stated that while “never say never” applies, Full House could find innovative financing solutions if a highly appealing deal arises. Nonetheless, he cautioned that many offers currently available “come with complications.”
Chamonix Update
Chamonix remains a significant area of interest for analysts and investors. The venue reported a 12% increase in revenue for the June quarter, although EBITDA reached breakeven. Fanger noted if Chamonix could achieve the average daily win levels seen in the Black Hawk, Colorado market, it could generate approximately $30 million in annual EBITDA. An additional 15% increase could potentially push yearly EBITDA to nearly $40 million.
“While we don’t project reaching those heights this year or even next year, we are optimistic about substantial improvement within the next 18 months,” stated Full House’s president.
Bain points out that once American Place and Chamonix are fully operational, likely by 2030, the combined EBITDA of these venues is expected to be 2.6 times greater than the total EBITDA of the rest of the Full House portfolio.