Century Casinos (NASDAQ:CNTY) is open to more domestic acquisitions, though the regional casino operator is likely to encounter delays in its efforts to shed its Casinos Poland unit.
The Colorado-based company is in the midst of working through the $195 million acquisition of the Nugget Sparks casino and a 50% interest in the real estate firm that owns the property assets of that gaming venue. Announced in February, that transaction marks Century’s entry into Nevada.
On its recent first-quarter earnings conference call, Century discussed the brisk pace of consolidation talks in the domestic gaming industry, prompting some analysts to speculate the operator could purchase another venue before the end of this year.
Management highlighted a surprisingly active M&A market in the US, with potential for another acquisition in the coming quarters,” said Stifel analyst Jeffrey Stantial.
He rates the stock a “buy” with a $20 price target, implying the shares can nearly double from the May 6 close.
While many US companies are discussing the impact of Russia’s war against Ukraine on quarterly conference calls, that trend largely isn’t applicable in the gaming industry because most US casino operators don’t have footprints in Eastern Europe.
With its two-thirds stake in Casinos Poland, Century is an exception. The company announced in January 2021 that it’s looking to divest that interest, but no deal has been reached. Now, those efforts are being delayed due to the Russia/Ukraine conflict.
“Conversely, the long-awaited Poland sale remains complicated amidst geopolitical uncertainty in the region,” adds Stantial.
Even with unrest in the region, Casinos Poland’s first-quarter results were in-line with Wall Street forecasts, but Century acknowledges it’s tricky finding a buyer due to the war.
“Poland sale as a likely positive catalyst for the shares — even if timing is pushed out beyond our initial expectations,” notes the Stifel analyst.
Potential Targets for Century
Given Century’s track record of acquiring under-appreciated assets in regional markets, it’s unlikely the operator goes shopping on the Las Vegas Strip, but on the conference call, management didn’t comment on specific markets on properties it could move on in the future.
“While the collapse in the public markets hasn’t seen prices come in at all, according to management, CNTY still sees attractive opportunities that would fit their operating strategy,” says Stantial. “Based on management’s tone, we think we could see another deal announced here in the coming quarters.”
At the end of the first quarter, Century had $117.2 million in cash and cash equivalents, up from $107.8 million at the end of last year. The company is also one of the most prolific generators of free cash flow in the gaming industry, indicating it has the resources for bolt-on deals.
When the Nugget Sparks deal is completed, Century will operate nine casinos in the US and Canada.
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