Published on: October 18, 2024, 04:21h.
Last updated on: October 18, 2024, 04:21h.
Golden Entertainment (NASDAQ: GDEN) may contemplate a sale and leaseback of one of its casinos to raise capital.
Analyst Carlo Santarelli from Deutsche Bank suggested in a report to clients that there’s a “rising probability” of Golden engaging in a sale-leaseback of one of its casinos. The analyst did not specify which casino Golden might consider selling. Currently, the company owns all the real estate where its eight casino hotels are located. Three are in Las Vegas, three in Pahrump, Nevada, and two in Laughlin.
In terms of property value, The Strat would likely fetch the highest price in a sale, making it the most attractive to a buyer. The resort is not on the Las Vegas Strip but is close by.
Santarelli did not provide a timeline for this potential deal, nor did he speculate on a real estate partner for the sale-leaseback. Golden will report its third-quarter earnings on November 7, which could address these rumors.
Selling a Casino Could Boost Golden Shares
Concerns over inflation and high interest rates affecting Golden’s customer base and tavern business have caused the stock to decline by nearly 23% this year, while the Russell 2000 Index has risen by 12.43%.
Recent negative revisions in analysts’ earnings and revenue forecasts for Golden have put pressure on the stock, leading to speculation about potential transactions that could bolster the company’s prospects.
We believe that our updated forecasts reflect relatively stable trends in key segments, adjusted for seasonality, and anticipate a decrease in same-store revenue declines as we enter the fourth quarter,” commented Santarelli. “The negative estimate revisions have fueled speculation about strategic actions by Golden.
The analyst lowered his earnings forecast but maintained a “buy” rating on the stock. He noted that the discounted stock valuation could prompt Golden to pursue a value-creating transaction.
Impact of a Casino Sale on Golden
Without specifics on the property to be sold, cap rates, or tax implications, predicting the financial impact on Golden is challenging. However, Santarelli estimated that in a sale-leaseback scenario, Golden would incur $87 million in annual rent expenses and have $130 million in cash by the end of next year.
The assumption of $87 million in rent suggests that either The Strat will be sold or that Golden might pursue sale-leasebacks on multiple properties.
Golden could also decide on the fate of the Colorado Belle in Laughlin, which has been closed since 2020. Speculation surrounds this property, but Golden has not disclosed any plans for it.