gilaxia/E Getty Images
Full House Resorts, Inc. (NASDAQ: FLL) provides an impressive and consistent experience in the casino and hotel management industry. The company is recently in an expansion phase with the addition of new construction in Colorado and is investing in sports betting. I am very positive about FLL’s long-term loose money generation. My style of discounted money (“DCF”) implied a $13 valuation consistent with the stock. I clearly see dangers similar to declining slot device winnings, table winnings and inflationary pressures. However, in my opinion, Full House Resorts is still an undervalued stock.
Headquartered in Las Vegas and operating in other regions of the United States, Full House Resorts manages casinos, hotels, sports and several similar businesses.
In my opinion, control has exceptional experience in the casino industry. The corporate owns, manages and develops its amenities in the states of Mississippi, Colorado, Indiana and Nevada. Each of its casinos is designed according to the cultural and symbolic interests of the region. in which they are located, thus generating a special express atmosphere to site.
The company ultimately controls five casinos, and construction of a sixth casino is underway on a structure in Cripple Creek, Colorado, which also houses the company-owned Bronco’s Billy’s Casino and Hotel. In this way, visitors can not only the entertainment domain of the casino, but also a complete package that includes a stay in a nearby hotel with services such as swimming pools, bathrooms, spa, restaurants and bars. As noted in the most recent quarterly report, Full House Resorts reports a significant amount of profits from food sales, hospitality, sports betting and other operations.
Source: 10-Q
While its base dates back to the last century, it is until 2014 that the leadership and control team has become a central component of the company’s work, allowing it to expand market horizons and amenities for its customers.
In addition to Bronco Billy’s Casino and Hotel in Colorado, the company owns Silver Slipper Casino and Hotel in Mississippi, Rising Star Casino Resort in Indiana and Stockman’s Casino and Grand Lodge Casino in the state of Nevada. more data from Full House housing and industries.
Source: 10-Q
Currently, Full House Resorts has a permanent staff of 893 employees, as well as another 265 people who perform part-time functions. This statistic covers the casino’s internal staff, as well as hotel facilities, dining spaces, and parking lots.
Analysts forecast net sales of $414 million by 2024 with net sales expanding 37. 54%. 2024 EBITDA would be $120 million with an operating profit of $98 million, in addition to an EBIT margin of 23. 79%. Analysts also expect capital spending of $150 million in 2024 with capex/sales of 36%.
Note that loose cash flow (“FCF”) is expected to increase from -$99 million in 2022 to -$2 million in 2024. The 2022 CWF was equivalent to $6 million. I believe that with additional revenue accumulation from 2025 and lower capital expenditures, the FCF can be positive around 2025.
Source: wallstreetzen. com
As of September 30, 2022, the money amounted to $85. 712 billion with money allocated of $156. 117 billion. Prepaid and other expenses amounted to $6. 512 billion, implying total existing assets of $252. 805 billion. Current assets constitute more than four times the total existing liabilities. Liquidity appears to be a factor here.
With tangible capital assets of $272,097 million and operating lease rights assets of $15,556 million, smartwill $21,286 million. Total assets equal $574,751 million, more than 1 times the total amount of liabilities. I think the balance sheet is in good shape.
Source: 10-Q
The list of liabilities includes structural liabilities of $16,425 million, in addition to other accumulated liabilities of $9,256 million and total existing liabilities of $42,560 million. With operating lease obligations of $12. 962 billion and long-term debt of $401. 429 billion, the total amount of debt would likely be of concern to some investors. Net debt is close to $160 million, or only about 1x 2024 EBITDA, which doesn’t seem that big. Total liabilities of assets are equivalent to $468. 33 billion.
Source: 10-Q
In addition to constructing a new building in Colorado, the company is also building a new entertainment center in the Waukegan domain north of Chicago, under the name American Place, under the direction of the Illinois Gaming Board. I think investors will probably see sales expansion coming from the new entertainment medium.
Source: 10-Q
In this scenario, I am positive about the company’s agreements with Circa Sports and sports betting on the company’s site. In my opinion, given the expected expansion in sports betting, the expansion of Full House earnings may be more powerful than expected.
The sports betting market is expected to grow at a CAGR of 9. 8% in the forecast period 2022-2031, the TMR study notes. Source: The sports betting market is expected to grow at a CAGR of 9. 8%.
In May 2022, we signed an agreement with a subsidiary of Circa Sports to jointly expand and manage on-site sports at The Temporary and American Place. Lately, Circa Sports operates at Circa Resort
Under past conditions, I included sales of $857 million in 2032 and a sales expansion of 7%. It also included EBITDA of $249 million with an EBITDA margin of 29%, an operating profit of $206 million and an EBIT margin of 24%. NOPAT of 2032 would be $154 million.
Source: Chatool DCF Model
My expectations come with a D
If we also use a WACC of 11% and an output of 6x EBITDA, the commercial cost would be close to $596 million. The valuation of the shares would be $436 million and the implied value would be $13 consistent with the stock.
Source: Chatool DCF Model
Under very adverse conditions, I expect a continued reduction in management-reported niche gain. Note that in the nine months ending September 30, 2022, the decline in slow gains was close to -5. 9%. The company’s table game profit also minimized to approximately -1. 2% over the same period. Lower KPIs would likely result in minimal FCF, and the company’s fair valuation could simply be minimized.
Source: 10-Q
It would be involved if inflationary pressures continued to hurt customers’ consumption habits. In addition, higher insurance and food and beverage prices can be very negative for the FCF line. The administration was already aware of some of these dangers in the last quarterly report.
These come with inflationary pressures, which can limit customer spending patterns as well as labor shortages to allow us to meet the demands of potential customers.
Consolidated operating expenses increased by $2. 9 million and $6. 4 million for the 3- and nine-month periods ended September 30, 2022, respectively, primarily due to the pre-opening prices of The Temporal (expected to open in the next 3 months) and Chamonix (expected to open mid-2022)-2023), as well as higher insurance prices, Food and beverages. Source: 10-T
Full House Resorts maintains a strict corporate philosophy, which includes educating employees, investors and visitors about the dangers of gambling at the casino and the importance of complying with the licenses and regulations of U. S. laws. UU. Si the company complies with certain regulatory frameworks, I think that fines or even the closure of casinos can damage the company’s profit line.
In my bearish case, I used sales of $670 million in 2032 and sales growth of 5%. an effective tax of 25%, NOPAT 2032 would be close to $121. 5 million.
Source: Chatool DCF Model
I assumed 2032 D
Considering a reduction of 12. 55%, with an EV/EBITDA of 5x million, the commercial cost would amount to $307 million. In addition, with net debt of $160 million, fair valuation would be $147. 5 million and implied value would be $4,265 consistent with sharing.
Source: Chatool DCF Model
Full House Resorts has exceptional and consistent experience in the casino industry and derives significant benefits from hotel management and similar businesses. The company is also investing in sports betting, which will likely grow faster than the casino segment. Given the new construction in Colorado, Full House Resorts may see significant profit expansion and FCF margin construction in the coming years. Under general conditions, I received a fair rating for Full House Resorts, Inc. About $13 consistent with participation.
This article written by
Disclosure: I/we have a long advantageous position in FLL stock, whether through ownership of stocks, features, or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.