Churchill Downs' Shares May Benefit from a Richmond Casino's Opening
Churchill Downs' (NASDAQ: CHDN) shares may receive a positive impact if the company manages to introduce a casino hotel in Richmond, Virginia. Currently, the company has partnered with Urban One to submit a proposal for a referendum on the matter, following a failed attempt in 2021.
On June 13, 2023, Churchill Downs Incorporated's joint venture with Urban One, RVA Entertainment Holdings, LLC, established a Resort Casino Host Community Agreement with the City of Richmond, positioning them as the potential casino gaming operator pending approval by the Virginia Lottery Department and a public ballot. As described in an SEC filing, this project involves a $562 million world-class entertainment and gaming complex.
Officials from Churchill Downs and Urban One anticipate that the proposed gambling venue would generate approximately $30 million annually in tax revenue and create thousands of well-paying jobs.
Attractive Benefits for Churchill Downs Shareholders
Should the casino hotel in Virginia come to fruition, investors in Churchill Downs would enjoy the financial advantages that come with it.
In a June 14 report to investors, Wells Fargo analyst Daniel Politzer projected that the casino hotel in Richmond could contribute $2 to $3 to Churchill's share price. This Virginia project is one of at least 10 major projects in Churchill's pipeline that Politzer predicts could generate an additional $300 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) in the long run, representing a 30% increase from present levels.
The analyst has a positive view on the stock, maintaining an "overweight" rating and setting a price target of $155. However, for investors to benefit, the Richmond casino has to materialize, and there are no certainties regarding its likelihood.
It has been debated by some Virginia lawmakers that the outcomes of the 2021 referendum should be maintained, and having another ballot so soon could be undemocratic. Conversely, advocates maintain that the initial referendum lacked comprehensive information about the advantages of a gambling establishment for voters. Churchill acquired Peninsula Pacific's assets last year for $2.5 billion.
Some political analysts in Virginia think that the outcome might be different on the second go-around since Churchill Downs has greater brand recognition than what Peninsula Pacific had previously.
Additional Projects for Churchill Downs
In addition to the Richmond casino proposal, Churchill Downs is also involved in other upcoming projects. These include a $200 million paddock enhancement for its famous racetrack in Kentucky, as part of a broader $300 million plan to refurbish the venue.
Beyond Richmond, the operator has other plans for new casinos in Virginia, Indiana, and Kentucky. At present, Churchill Downs operates 12 casinos with over 14,000 gaming machines and 300 table games across ten states.
