David Bain of Aegis Capital starts coverage of Century Casinos, Inc. CNTY 4.3% with a Buy rating and $9.30 price target, saying the company is underfollowed and underappreciated as a mid-market casino developer and operator with both near-term and long-term catalysts.
4 Reasons For Buy Rating
Bain’s bullish thesis on the stock is based on the following:
- “We believe shares have not appropriately priced its Century Mile Casino development (final approval likely in 30 – 45 days), which we believe is worth ~$1.30 per share.”
- “We value existing operations (pre-Century Mile) at ~$8 per share based on a blended 7.3x CY18 EV/EBITDA. This represents a 5+ percent discount to the average current trading value of domestic regional casinos.”
- “CY18 forecasted net leverage (less cage capital) is ~1.3x and even with its Century Mile development, forecasted CY18 net leverage would only rise to ~2.6x. We anticipate 1 to 2 accretive acquisition or development announcements this year, offering additional potential upside to our price target.”
- “We view management as prudent and capable of identifying and executing on lesser known gaming opportunities both in North America and Internationally.”
The key near-term catalyst is the potential approval to build and operate Century Mile, a one-mile race-track with casino entertainment on Edmonton International Airport land and adjacent to a 415,000 square foot premium outlet mall scheduled to open later this year.
Bain expects the $40 million project could show a capital return of over 25 percent and he assumes 20 percent as his base-case return for valuation purposes.
At last check, shares of Century Casinos rose 5.73 percent to $7.38. The $9.30 price target implies a a 33 percent gain from March 9 close.
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