Date Posted: November 8, 2024, 03:09h.
Last updated on: November 8, 2024, 03:09h.
Golden Entertainment (NASDAQ: GDEN) saw an increase in its stock price on Friday following hints from executives regarding the potential monetization of the company’s real estate assets.
During a conference call following the release of the third-quarter earnings report, CEO Blake Sartini mentioned that the company is exploring strategic options to enhance shareholder value. Golden Entertainment may consider selling off assets as opposed to acquiring new ones, as the current market offers limited acquisition opportunities.
CFO Charles Protell stated that Golden is assessing the value of its real estate holdings. The company owns the real estate for all eight of its casino hotels, with three in Las Vegas, three in Pahrump, Nevada, and two in Laughlin.
Although no immediate plans for a property sale were announced, Golden Entertainment’s real estate holdings are believed to hold significant value.
Golden Entertainment Real Estate Potential Value
Rumors had previously circulated that Golden Entertainment might look to monetize its real estate assets to benefit shareholders. This earnings call marked the first public mention by executives regarding a potential review of its real estate portfolio.
B. Riley analyst David Bain noted, “On last night’s call, we believe GDEN was the most transparent it has ever been, and it does not intend to remain idle from a corporate strategic standpoint should shares remain near current valuation levels. GDEN suggested a ‘high bar’ for acquisitions given its valuation and suggested it is in ‘active mode,’ reviewing the math around the value of its own real estate.”
The analyst suggested that by adopting an asset-light model and divesting its land assets, Golden’s stock could potentially be valued at $42 per share, significantly higher than its current trading price of around $32. Selling real estate would create long-term liabilities for Golden, but it would also boost cash reserves for other investment opportunities.
The Strat in Las Vegas is considered the most valuable property in Golden Entertainment’s portfolio and could fetch a substantial portion of the company’s market capitalization in a potential sale.
Golden Stock Undervalued
Bain argued that due to Golden’s operations being primarily in Nevada, a leading gaming market in the US, the company’s shares should not be undervalued compared to industry peers.
He noted that Nevada’s gaming market presents growth opportunities for Golden, and the company’s share buyback program demonstrates confidence in the stock’s value.
“Net leverage is ~2x (under-levered) and outside its over 3% dividend yield, GDEN increased its repurchase authorization $100M to $131M total, and made clear it will continue to buy back its stock,” concluded Bain.