Full House Stock Comes Up Aces on Waukegan Win

Full House Resorts (NASDAQ:FLL) stock got a major lift this week after the Illinois Gaming Board (IGB) chose the operator as the winning bidder for an integrated resort project in Waukegan.

Full House stock
Full House stock
A rendering of Full House’s planned casino in Waukegan, Ill. The project is seen as a major catalyst for the stock. (Image: Las Vegas Review-Journal)

On Dec. 8, the day of the IGB announcement, shares of Full House surged more than 18 percent on volume that was more than eight times the daily average. While the stock succumbed to some profit-taking on Friday, closing lower by five percent on below-average turnover, it finished the week higher by 27.13 percent.

Full House has one more hurdle to clear in Illinois. It’s been approved for preliminary gaming license, but IGB must still sign off on a permanent permit. Still, the Waukegan news is a clear win for Full House stock, a name Wall Street is broadly bullish on and one that’s rewarding investors as highlighted by a year-to-date gain of 176.59 percent.

Waukegan Material for Full House Stock

Analysts have long been enthusiastic about the potential impact an Illinois casino-resort could have on Full House shares.

In late November, Roth Capital analyst Edward Engel initiated coverage of Full House with a “buy” rating and a $16 price target (now $18), noting that $3.50 of that forecast is attributable to Waukegan. Even with this week’s rally by the stock, that $16 price objective implies 47.1 percent upside from the Friday close. The consensus price target on Full House is $14.67.

In a note to clients this week, Engel said Full House’s Waukegan venue is capable of generating earnings before interest, taxes, depreciation and amortization (EBITDA) and gross gaming revenue (GGR) comparable to the Grand Vic — a casino 40 miles away from Chicago. He adds EBITDA of $50 million to $60 million implies return on investment of approximately 15 percent on the $350 million to $400 million Full House is expected to allocate to the Illinois project.

“Illinois regulators are permitting Full House to operate a temporary casino, which we see reducing financing costs and improving IRRs,” said Engel. “Management believes it can construct a temporary casino as quickly as seven months, where the structure would be large enough to operate ~1,000 slots and ~30 tables.”

The analyst notes a temporary casino will cost $50 million to $100 million to build.

More Upside Is Possible

Full House is easily one of the best-performing gaming equities this year-to-date and it’s trouncing small-cap benchmarks, but that doesn’t mean more upside is off the table. Engel believes the stock can continue appreciating.

Prior to the Waukegan announcement, “we factored a ~60 percent likelihood of being selected. Over the coming months, we expect FLL shares to continue moving higher as investors buy ahead of the Chaminox expansion (opens 1Q23) and as value from Waukegan becomes more tangible.”

Chamonix is the operator’s project in Cripple Creek, Colo., which is slated to be a more palatial complement to its Bronco Billy’s property in the same town.

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