Golden Entertainment Prefers Share Repurchases Over Nevada Acquisitions
Golden Entertainment (NASDAQ: GDEN) recently took steps to reduce its debt and announced its first-ever quarterly dividend. These moves include share buybacks, which could be preferred ways for the company to return capital to shareholders as opposed to acquiring gaming venues in Nevada.
The company used $287 million last month to redeem outstanding senior notes, reducing its outstanding liabilities and leaving it with around $100 million in cash on hand and access to a $240 million revolving credit facility. This presents a strong liquidity position, making it unlikely that Golden will acquire gaming venues in Nevada in the near future.
During the first-quarter earnings conference call with analysts, Golden CFO and President Charles Protell said: "At this time, it’s difficult to find an opportunity to acquire Nevada-based casinos with owned real estate, which would be more accretive than acquiring our own stock, which we intend to do over the remainder of the year with our current repurchase authorization.”
Golden has been rumored to potentially be acquisitive, especially after selling the Rocky Gap Casino Resort in Flintstone, Md. for $260 million last year. This deal made Golden a Nevada-only gaming company.
A Practical Approach to Acquisitions
In the current economic environment, characterized by persistent inflation and the highest interest rates in two decades, the gaming industry is expected to experience consolidation. Protell acknowledged this on the conference call with analysts.
"While we continue to review actionable strategic opportunities, the current market environment and macro backdrop has made it less conducive to M&A for us," he added.
If Golden were to borrow capital to finance an acquisition, it would be doing so at higher interest rates than it would have a few years ago. Additionally, its preference for buying gaming venues with owned real estate might be a smart move for investors, as Golden could avoid taking on a new long-term obligation to a landlord through such a deal.
With many Las Vegas locals casinos having owned real estate, there are plenty of potential targets. However, most of these are controlled by Golden's rivals, Boyd Gaming (NYSE: BYD) and Red Rock Resorts (NASDAQ: RRR), who have not shown any signs of selling their Nevada properties. Red Rock has a policy of never selling casinos or land to other gaming companies.
In conclusion, if Golden is looking for acquisitions in Las Vegas, the current options are limited.
Golden's Strategy Could Prove Successful
Outside of Las Vegas, Golden is the leading operator in Pahrump and competes with Caesars Entertainment (NASDAQ: CZR) for top status in Laughlin. This suggests that Golden may not need to make acquisitions in those markets. In fact, at the first-quarter earnings call, there was no mention of the fate of the Colorado Belle - Golden's shuttered venue in Laughlin.
Golden currently does not own any casino hotels in the Reno/Lake Tahoe market. Some analysts have suggested that market might be a good place for Golden to consider deals, but the company has not indicated that this region is on its radar.Despite the lack of deal-making, the case for Golden stock is strengthened by buybacks, debt reduction, and dividends - the three pillars of shareholder yield.
Read also:
- Columbia University Faces Possible Expulsion Following Demonstrations
- Football turmoil in Munich: Last-minute penalty stuns Bayern
- Steinmeier Faces Backlash Over "Expert Caliber" Remark
- US State Department Lacks Own Standards in Regard to Israel
Source: www.casino.org
