Century Casinos (NASDAQ:CNTY) stock is taking a breather Monday after the company last week handily topped Wall Street earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR), sparking a 6.4 percent rally in the shares, but one analyst sees more upside for the high-flying shares.
The regional casino operator is higher by 146.48 percent year-to-date, good for one of the best showing among all gaming equities, and B. Riley analyst David Bain is out with more bullish commentary on Century. In a note to clients Monday, Bain reiterates a “buy” rating on the gaming stock while boosting his price target to $24. That implies upside of 52.3 percent from the Nov. 5 close and is well above the consensus projection of $21.
Following CNTY’s 12 percent 3Q21 EBITDAR beat versus our Street-high estimate, we raise CY21E/CY22E/CY23E EBITDAR 6 percent/2percent/2 percent,” said Bain. “We continue to believe CNTY represents a scarce casino operator value play that could potentially double EBITDAR through organic growth domestic acquisitions by CY23E, creating per-share value of over $30, in our view.”
As is the case with so many gaming companies, particularly regional operators, Century employed cost-cutting measures immediately following the onset of the coronavirus pandemic, leading to significant margin expansion. The operator is proving adept at extending those elevated margins into the reopening phase and analysts are taking note.
More Sparks for Century Stock
While it’s on a scintillating pace this year, Century stock doesn’t lack for catalysts, which include the operator’s efforts to drive net leverage to 1x by the end of this year.
“CNTY’s current portfolio EBITDA ramp also couples with a high-return expansion project in Missouri, its largest market, and potential divestment of its lower investor valued Poland operation over time,” adds Bain.
Century’s namesake venues in Cape Girardeau and Caruthersville, Mo. are bolstering the case for the stock. Century recently landed approval to bring the Caruthersville riverboat ashore, and is planning a large-scale hotel expansion at the venue.
The company is in the process of divesting its Poland assets, which would generate cash while helping hone its focus on North America.
Century Stock Cheap, Deals Remain Possibility
As is the case with other small regional casino operators, Century is expected to participate in industry consolidation as B. Riley’s Bain points out. The effort would be made easier with cash from the sale of the Poland assets. The analyst says the company is currently reviewing multiple candidates for inclusion into its portfolio.
Century has a knack for scooping up venues competitors no longer want and wringing benefits out of those assets. An acquisition announcement could arrive in the first half of next year. Additionally, the stock is cheap relative to rivals.
“Net, operational execution continues, multiple catalysts remain and share valuation remains nearly half of peers at 5.8x/5.0 CY22E/CY23E EV/EBITDA,” adds Bain.
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