Century Casinos Contemplates Poland Sale, May Opt for Share Repurchases, Suggests Analyst
Century Casinos (NASDAQ: CNTY) might decide to sell their two-thirds ownership in Casinos Poland and at some point even consider buying back their own shares. This is what Stifel analyst Jeffrey Stantial found out during his conversation with Century co-CEO Peter Hoetzinger. Stantial noticed that even though there's a good chance of profitability in this slumping gaming company, its share price trades at a cautious 23% free cash flow yield compared to 2025 projections.
A potential relief rally could be on the horizon as the stock has declined by 18.6% in the past month and 46.1% from earlier this year. The sale of Casinos Poland stake could possibly set off this surge.
During his recent talks with Hoetzinger, Stantial mentioned that though the Casinos Poland segment adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) could return to $11 million or more once the last temporarily shut property reopens in August, the company plans to continue with the strategic divestiture of Casinos Poland. He added that these plans have regained momentum now that the recent license cycle has been concluded.
The sale was diverted by the Russian invasion of Ukraine, which drove many Ukrainians to seek refuge in Poland. The Casinos Poland venues have been popular among these Ukrainians.
Century Casinos as a Possible Buyback Company
Stantial pointed out that Century has $137 million in cash on hand, making it more than $55 million over its current market cap of $81.62 million. This shows that the company's stock receives little appreciation for its solid balance sheet, indicating a potential value opportunity. There's a possibility that Century management might buy back shares in the future to convey to investors that they see worthiness in the stock.
Stantial believes that with the present valuation, buybacks are the best way for management to generate returns. However, he acknowledges the high cost of borrowing if Century's stock appreciates before that time.
Stantial has a "buy" rating and has set a price target of $4 on the stock. He stated that Century is probably going to hold some funds on hand for a while due to expansion expenses, and the usage of surplus capital is not likely before they finish renovations at their Caruthersville, Mo. casino hotel.
Missouri Properties
In the US, Century's pair of casinos in Missouri, located in Cape Girardeau and Caruthersville, play a significant part in the overall investment case along with the Nugget in Sparks, Nev., and Rocky Gap in Maryland.
It seems that Century's investments in Missouri can potentially generate long-term benefits, serving as a possible catalyst for the stock.
Stantial concluded his remarks by saying that Cape Girardeau has been relatively resilient despite the opening of Walker's Bluff on August 25, although there is a risk that promotional spending may increase again. The $52 million Caruthersville boat-to-land project is right on schedule and budget, and management expects to see $3-$4 million additional adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which translates to a 15% cash-on-cash return. Comparable boat-to-land projects have usually yielded around 30% cash-on-cash returns.
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