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  1. #76  
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    Golden Entertainment Glitters Beneath The Radar Now, But Could Spike This Year

    May 15, 2017 2:31 PM ET|
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    | About: Golden Entertainment, Inc. (GDEN)by: Howard Jay Klein




    Howard Jay Klein

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    Summary

    This diverse, small-cap gaming company posted a solid 1Q17 performance on all units including its cannibalization-challenged Maryland casino.
    It owns four casinos, operates 12,000 tavern and casino slots out of 980 route and resort locations.
    It is well positioned to compete for a license to operate in the potential 40,000 machine market in Pennsylvania.



    Note: This research was published exclusive to House Edge members on Friday May 12 and was embargoed to this site until after today's market opening. At our call the stock was $16. It closed that day at $17.92 reflecting a spike to which I believe our post was a key contributor. SA readers will note I am still guiding the stock to $20.
    Golden Entertainment Inc. (NASDAQ:GDEN) has been more than a blip on our radar screen for a while now but the intriguing price and prospects we believe have still largely eluded the majority of gaming stock investors and by extension the market for small-cap gems in general. We think it's more than worth a hard look by our House Edge members now.
    Even without high visibility catalysts, the stock is undervalued primarily because it's somewhat harder to understand than most gaming companies. It's not a big time operator of visible Las Vegas strip resorts, a geographically broad-based US regional, or even a powerhouse in the Las Vegas locals casino resort market. Because of this diversity it's a bit hard to understand since so much of its revenue comes from the legacy slot route business unfamiliar to most investors outside of Nevada.
    Golden owns four casinos (in Nevada, Montana and Maryland.) But the bulk of its revenue comes from 54 owned and operated food and beverage taverns in Nevada plus operation of 10,500 slot machines in 980 route locations throughout the state. Those locations are bars, supermarkets, transportation terminals, delis, etc. Across all its business units it runs 12,000 slots. You can't easily understand its business because it appears on the surface to lack a central focus. And as the sage of Omaha has repeated over the years: Don't buy a stock unless you understand its business. And that takes study.
    Let's try to unscramble the company so you can understand its business and the strong potential upside we see at its current trade.
    Here's a quick look at the basics:
    Price at House Edge marketplace writing last Friday: $16. Price at opening today: $17.92
    Market cap: $361m
    52-week trading range: $8.65 t $16.67. Now near the high it's clear that the market believes the good news about the company is already baked into the trade. We've looked at the company, its management and prospects and attach a more bullish price target on the stock - sans any new catalysts - at $20. The prospect of a significant catalyst not yet baked in is where the magic sauce could lie. We'll examine it later in this research.
    For perspective, the company's 2016 annual revenue was $403m throwing off an EPS of $0.73 and paying a $1.71 dividend.
    The stock is thinly traded, averaging 45,000 shares a day. Its ownership profile is likewise relatively modest for a gaming stock at 28% of the outstanding held by 72 institutions with 104 million shares.
    1Q17 results were strong
    Net revenue growth for the quarter: 17.1%
    EBITDA growth was 28.6%
    P/E ratio: 22.25
    EPS (NYSE:TTM) $0.73
    Earnings growth: 24%
    Industry peers: 19.40%
    Highlights we like
    This quarter generated record revenues of $106 million with EBITDA rising to $12.6 million, up 28.6% YoY. Of this $24.3 million was generated by the casinos, up 8.5% YoY, churning out an EBITDA of $6.3 million, up 32.3% YoY. The company's Rocky Gap casino in Flintstone, Maryland net revenue grew 11.2% YoY to $15 million, while EBITDA rose 39.6% YoY to $3.4 million. This upside was achieved despite the December '16 entry into the Maryland market of the huge, MGM (NYSE:MGM) National Harbor integrated Resort whose blistering gaming revenue yield is moving at around $50 million a month clip and cannibalizing its major competitors like Caesars (NASDAQ:CZR) Horseshoe in Baltimore and suburban Maryland Live!
    The reason? Golden Management made a smart call when choosing the original location, way off in the extreme western part of the state where it did not have to compete head to head with casinos within the metro Baltimore area. From first legalization, in 2004, the State of Maryland maintained ownership of all the slot machines in authorized casinos. In this last legislative session there has been reform. Operators are now permitted to buy back the machines from the state in exchange for a 10% reduction in the gaming tax on slot win.
    Golden expects to exercise this right by July. It will buy back its slots, which it says will be $3 million accretive to EBITDA with a payback over three years against the total paid to the state. Golden's latest balance sheet shows $45 million in cash on the books against $181 million of debt. Due to its strong cash flows and despite its $1.71 dividend payout, plus capex of $5.7 million, the company announced it had still managed to reduce total borrowings under its current credit facilities by $6 million and expects to continue cutting its debt. Its average win per day per machine across its system is $127, a good number considering the diverse markets it serves. A top resort performer on the strip like Wynn averages $256 a day while the mass focused Fitzgerald's slots take in around $81 a day. So Golden's win falls within the range's middle from a variety of stores serving varying population densities.
    Golden opened its 54th owned and operated Nevada tavern in Q! and expects to launch 16 more locations by year's end. Management points out, as to other operators in the locals casino sector, that the statewide unemployment rate that reached a peak at 13.7% during the 2008/9 recession, has now fallen to 4.8%, making Nevada one of the fastest job growth states in the nation. Add the large number of retirees fleeing high tax states like California, and you have a growing demographic mix that augers very bullish for companies like Golden.
    Conclusion: If no major catalyst develops going forward other than continuing evidence of a well managed, profitable, and stable company building it growth profile, GDEN would be a buy, but a catalyst is looming and it could be a biggie.
    The tavern slot world: Could Pennsylvania be ready to enter?
    The state of Illinois currently as of 1Q17 has 5,932 video slot terminals in licensed taverns winning an average of $127 a day in the four years since legalization.
    Now the State of Pennsylvania is considering legislation to legalize 40,000 tavern slots. The bill which, like all gaming bills, has been through many stops and starts since inception, appears to be gaining momentum according to local sources in the state capitol.
    Golden's 1Q17 earnings release indicated the company spends between $500,000 to $1,000,000 a year on lobbying in states where tavern slot legalization bills are being considered by lawmakers. It's a political process so there is no telling where it may go or when but clearly it is moving ahead. If the bill should finally pass either in this year or next year's sessions, we believe Golden could be a serious bidder for a license as a tavern/slot operator, or if the statute authorizes distributors, as a route operator.
    Any such development would rank as a major catalyst for Golden stock on the news of passage. We believe depending on the nature of the law and the level of participation a Golden license would imply that the stock could move up 40%. There are no certainties here but even assuming Golden gets a Pennsylvania licensing module or none at all, the downside risk to the stock is minimal. Based on its current trading range it presents a well-managed, diversified, eager for sensible expansion kind of small cap gaming company we think is worth a good, hard look by investors now.
    The risk/yield ratio to us makes sense at its current trade. And we think part of the reason is simply that investors don't understand the company's business model.
    Author's note: All my gaming stocks are held in a blind trust for my children and grandchildren as a matter of policy so as to avoid any potential conflict of interest with my consulting business in the casino space. This applies to clients, past, present or future.


    Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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  2. #77  
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    Coming this week - our newest Pt's Gold will be unveiled in Las Vegas off Valley View and West Martin. Our 55th Nevada tavern @PTsEntGrppic.twitter.com/i4ZIIHR9Qk


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    Golden Entertainment, parent company of the PT’s Pub and Sierra Gold tavern chains, had record first-quarter revenue and more than doubled its net income over last year. The favorable quarter is keeping Golden on track to invest in more taverns in Las Vegas.
    “We remain on schedule to open a total of seven new Las Vegas taverns in 2017 and believe these taverns are one of the most attractive ways we can invest our capital given the positive macroeconomic trends seen in Nevada,” said Blake Sartini, the company’s chairman and CEO.
    Shares of Golden Entertainment are up 41 percent this year, while Boyd shares have risen 27 percent. Red Rock has lagged, gaining 3.4 percent. https://www.reviewjournal.com/busine...-tech-in-2017/
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    Casino Stocks to Buy Now

    Ryan McQueeney

    ZacksJune 6, 2017

















    Perhaps it’s because trading stocks can often mirror the thrill of winning big at the blackjack tables, or maybe it’s because Las Vegas conjures images of the world’s most flashy brands and businessmen. Regardless of the reason, it’s clear that casino stocks are always among the most popular on Wall Street
    Luckily for investors, now is also a great time to be buying casino stocks, as continued domestic strength and a great recovery in Macau have led to rising share prices. In fact, the overall gaming industry currently sits in the top 26% of the Zacks Industry Rank.
    With casino stocks this hot right now, investors are not going to want to miss out. Luckily, we can use Zacks’ proven stock-picking methods to find solid stocks in any industry. Check out these highly-ranked casino stocks today:
    1. Wynn Resorts (WYNN)
    Led by the legendary Steve Wynn, this iconic gaming brand once again posted impressive earnings results in the most recent quarter. Wynn reported earnings of $1.24 per share and revenues of $1.48 billion, surpassing our respective consensus estimates of $0.74 and $1.34 billion. The company’s new Macau resort, the Wynn Palace, marked its second full quarter of operations, lifting total revenue figures 48% on a year-over-year basis.
    Since the report, we’ve seen a flurry of earnings estimate revision activity for WYNN, lifting its current-quarter Zacks Consensus Estimate by 31 cents and giving the stock a Zacks Rank #1 (Strong Buy). And looking down the road, Wynn is positioned well in Macau and Vegas; the company just finalized plans for the Le Reve which it has designed to be the preeminent luxury hotel and destination casino resort in Sin City.

    2. Melco Crown Entertainment (MLCO)
    Melco Crown was another casino giant that really impressed in the most recent earnings season. The company, which gets the majority of its revenue from Macau, posted adjusted earnings of $0.24 per share, crushing the Zacks Consensus Estimate of $0.08. Revenues of $1.28 billion also topped our consensus estimate and soared 15.7% year-over-year.
    Revenues in Macau grew 24% in the month of May, beating estimates and marking the tenth-straight month of growth in the region. This is great news for Melco Crown, which has steadily risen all year. Indeed, shares are up 40% year-to-date. Nevertheless, this Zacks Rank #1 (Strong Buy) stock is poised to break even higher.

    3. Golden Entertainment (GDEN)
    Formed in 2015 after the merger of Golden Gaming and Lakes Entertainment, Golden Entertainment is a regional casino and tavern operator that has been on an absolutely insane run this year, with shares gaining nearly 45% so far.
    And while some investors may say that means GDEN is trading at a premium, all signs point to continued growth for this stock. Shares could certainly still march higher, as indicated by its Zacks Rank #2 (Buy) ranking, and it is fundamentally sound, evidenced by its “A” grades for Value and Growth.

    Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!https://finance.yahoo.com/news/3-cas...180006677.html
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    Newest PT’s Gold continues Golden Entertainment tavern expansion plans

    CDC Newswire · June 8, 2017 at 11:19 am



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    LAS VEGAS (June 8, 2017) – Golden Entertainment, Inc. announced today it opened a new PT’s Gold in south Las Vegas, the third all-new tavern the company has unveiled in Southern Nevada this year.
    The newest PT’s Gold is at 4880 West Silverado Ranch Road, near Decatur Boulevard. The tavern is four miles from the Southern Highlands residential community.


    t;
    The two taverns that opened previously are PT’s Gold on the corner of Valley View and West Martin Drive, which opened a week ago, and PT’s Gold on Buffalo Drive near Warm Springs, which was unveiled in March.
    PT’s Gold features award-winning dining choices, beverage options, and entertainment attractions that have made PT’s a popular destination for local patrons. The new PT’s Gold has 15 bar top video gaming devices, 25 high-definition televisions and will employ 20 team members.
    Blake L. Sartini II, senior vice president of distributed gaming for Golden Entertainment, said the new tavern’s location fits the company’s development strategy of placing entertainment and dining options in a growing area.
    “Golden Entertainment is committed to Nevada and our strategic development plan to operate 60 traditional taverns by the end of 2017,” Sartini said. “We fully believe in the vibrancy of the Las Vegas locals market and are proud to employ more than 800 team members in our Nevada taverns.”
    The PT’s Gold menu features a wide selection of appetizers, pizzas, salads, sandwiches and entrees. The beverage selection includes featured beers produced by PT’s Brewing Company. PT’s award-winning happy hour takes place daily from 5 p.m. to 7 p.m., and 12 a.m. to 2 a.m. During happy hour, all PTEG taverns offer 50 percent off drinks and pizzas and select appetizers for $5. PT’s Gold is part of the Golden Rewards player loyalty program and the Beer & Bites dining loyalty program.

    Check out the menu here. For information, please call (702) 840-3883.
    The company’s tavern brands include PT’s Pub, PT’s Gold, PT’s Ranch, PT’s Brewing Co., Sean Patrick’s, Sierra Gold and SG Bar.
    About Golden Entertainment, Inc.
    Golden Entertainment, Inc. owns and operates gaming properties across two divisions – distributed gaming and resort and casino operations. Golden Entertainment operates approximately 12,000 gaming devices and nearly 30 table games in Nevada, Maryland and Montana. The Company owns four casino properties, more than 50 taverns and operates approximately 960 distributed gaming locations in multiple jurisdictions. Golden Entertainment is focused on maximizing the value of its portfolio by leveraging its scale, leadership position and proven management capabilities across its two divisions. For more information, visit www.goldenent.com.
    _________
    Media Contact: Howard Stutz of Golden Entertainment
    (702) 495-4490
    hstutz@goldenent.com
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    Golden Entertainment Enters into Definitive Agreement to Acquire American Casino & Entertainment Properties for $850 Million






    Business WireJune 12, 2017








    LAS VEGAS--(BUSINESS WIRE)--
    Golden Entertainment Inc. (GDEN) (“Golden” or the “Company”), announced today that it has entered into a definitive agreement to acquire American Casino & Entertainment Properties LLC (“American”), which owns three properties in Las Vegas including the Stratosphere Casino, Hotel & Tower, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, as well as its fourth property, the Aquarius Casino Resort in Laughlin. American is expected to generate approximately $413 million of net revenues and $103 million of EBITDA in 2017, and Golden expects to achieve approximately $18 million of annual run-rate synergies post-closing. The purchase price of $850 million includes working capital cash estimated to be approximately $28 million at closing.
    The purchase consideration will consist of $781 million cash plus approximately four million shares of Golden stock issued to American’s current owner, Whitehall Street Real Estate Partners 2007 (“Whitehall”), a real estate private equity fund managed by the Merchant Banking Division of Goldman Sachs. The number of shares issued to Whitehall was determined based on Golden’s 10-day volume weighted average price of $17.05 as of June 9, 2017. Upon closing, Whitehall will own approximately 15% of Golden’s diluted shares outstanding. The transaction is expected to be immediately accretive to Golden’s operating results, increasing free cash flow and earnings per share significantly. Based on American’s estimated 2017 EBITDA, the acquisition represents an 8.0x pre-synergies multiple and a 6.8x post-synergies multiple.
    Upon completion of the transaction, Golden will operate over 15,800 slot machines, 114 table games and more than 5,100 hotel rooms across eight casino properties and almost 1,000 distributed gaming locations including the largest branded tavern portfolio in Nevada. Pro forma for the completion of the transaction, the combined company would generate approximately $847 million of net revenues in 2017 and approximately $180 million of EBITDA in 2017, including $18 million of estimated run-rate synergies.
    The transaction is not subject to a financing condition. Golden has received committed financing totaling $1.1 billion from JPMorgan Chase Bank, N.A., Credit Suisse, Macquarie Capital and Morgan Stanley & Co. LLC to fund the cash consideration as well as to refinance Golden’s existing credit facilities. The financing commitment includes a $100 million revolving credit facility to support Golden’s future organic and strategic growth initiatives.
    Blake L. Sartini, Chairman and Chief Executive Officer of Golden, commented, “This is a transformational event for our Company, creating a significant gaming portfolio centered around Nevada-based casinos that, in addition to our Pahrump properties, will include two well-known Las Vegas locals casinos, a destination resort in Laughlin, and the iconic Stratosphere property on the Las Vegas Strip. Our market leading distributed gaming businesses in Nevada and Montana, as well as our Casino Resort in Maryland, present several opportunities to cross-market and promote these new assets that we welcome to the Golden family. As with our existing businesses, we believe the American properties are poised to benefit tremendously from anticipated continued economic growth in Nevada, particularly from the continued strength in the Las Vegas market.”
    Mr. Sartini further stated, “The American properties represent an ideal complement to our existing operations as they strengthen our presence in the Las Vegas locals market while providing us with an iconic destination property on the Las Vegas Strip. Our proven strategy of focusing on guest service, quality food and beverage offerings and effective player marketing will complement the strong existing operations currently at all of American’s properties. In addition, given the recent investment activity focused on the north end of the Las Vegas Strip, we see future potential to develop the approximately 15 acres of excess real estate surrounding the Stratosphere. This acquisition supports our goals for growth in many ways, including the potential to use our increased free cash flow and financial scale to pursue distributed gaming opportunities in existing or potential new markets.”

    Charles Protell, Chief Financial Officer of Golden, concluded, “This transaction significantly increases the size of our operations and allows us to access the capital markets more efficiently while enhancing our ability to further expand our leading presence in distributed gaming. At closing, we anticipate our funded total debt to be approximately $1 billion resulting in a net leverage ratio of less than 5.5x. Post-closing, we anticipate leverage will be reduced by operating cash flow of the combined businesses. In addition, we expect that our new credit facility will provide us with the flexibility and liquidity to pursue future organic and strategic opportunities.
    “With the acquisition of American, we will improve our position to benefit from Nevada’s strong economic trends which are driving gaming, room, and F&B revenues on the Las Vegas Strip, in the Las Vegas locals and in other Nevada gaming markets. Despite the significance of our Nevada casino portfolio after closing this transaction, we intend to continue to invest in the expansion of our industry leading distributed gaming business including our planned tavern developments in Las Vegas as well as our pursuit of potential distributed gaming operations in new jurisdictions.”
    The transaction is subject to customary regulatory approvals and is expected to close by the end of 2017.
    J.P. Morgan Securities LLC, Credit Suisse, Macquarie Capital, and Morgan Stanley & Co. LLC are acting as co-financial advisors and Latham & Watkins LLP is acting as legal counsel to Golden in connection with the proposed transaction. Macquarie Capital has also provided a Fairness Opinion to Golden’s board of directors in connection with the transaction. Goldman Sachs & Co. LLC is acting as financial advisor to American and Sullivan & Cromwell LLP is acting as its legal counsel.
    Conference Call, Webcast, Investor Presentation
    Golden will host a conference call today, Monday, June 12 at 4:30 p.m. ET to review the transaction. To access the conference call, interested parties may dial 866/394-1484 or 213/660-0701 for international callers. The Conference ID Number is 38250490. Participants can also listen to a live webcast of the call from Golden’s website at “Investors”. During the conference call and webcast, management will review a presentation summarizing the proposed transaction which can be accessed from Golden’s website at “Presentation”. A webcast replay will be available for 90 days following the live event at “Investors”. Please call five minutes in advance to ensure that you are connected. For the webcast, please allow 15 minutes to register, download and install any necessary software.
    About American Casino & Entertainment Properties LLC
    American owns and operates four gaming and entertainment properties in Nevada which in aggregate feature 3,879 slot machines, 89 table games and 4,895 hotel rooms:

    • The Stratosphere Casino, Hotel & Tower features the 1,149-foot Stratosphere Tower, one of the most iconic landmarks on the North Las Vegas Strip and the tallest freestanding observation tower in the U.S., offering views of the city, award-winning fine dining and lounges, specialty retailers, the world's highest thrill rides and SkyJump Las Vegas. The property features an 80,000 sq. ft. casino with 743 slot machines, 42 table games, 2,427 guestrooms and suites, 13 restaurants, nine bars, two pools and entertainment venues.
    • The Aquarius Casino Resort, located in Laughlin, Nevada, is an award-winning destination resort located on the banks of the Colorado River. The largest casino operations and hotel in Laughlin, Aquarius features 1,227 slot machines, 33 table games, and 1,906 guestrooms and suites offering river, mountain and desert views. Guests enjoy over 57,000 sq. ft. of casino floor space, eight restaurants, three bars, an entertainment Pavilion and a range of outdoor and sports amenities.
    • Arizona Charlie's Hotel & Casino – Decatur is located just off the Las Vegas Strip. The property features 1,060 slot machines, seven table games, 259 hotel rooms, a Poker Room, a Race & Sportsbook, the city's only 24-hour bingo room, live Keno, fine dining and a café and buffet.
    • Arizona Charlie's Hotel & Casino – Boulder is located on Boulder Highway, just off the U.S. 95 freeway. The property features 849 slot machines, seven table games, 303 hotel rooms, a full service casino with a hotel and RV park; the property also features a 24-hour bingo room, and fine and casual dining options.

    About Golden Entertainment Inc.
    Golden currently owns and operates gaming properties across two divisions – distributed gaming and resort and casino operations. Golden operates approximately 12,000 gaming devices and 25 table games in Nevada, Maryland and Montana. The Company owns four casino properties, 56 taverns and operates almost 1,000 distributed gaming locations in multiple jurisdictions. Golden is focused on maximizing the value of its portfolio by leveraging its scale, leadership position, and proven management capabilities across its two divisions. For more information, visit www.goldenent.com.
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  7. #82  
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    18% on the day, up to $20 per share. Any reason to sell and lock in some gains? Or ride this thing out?
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    Bruce said it would probably double from it's March price, so i doubt he would sell now.
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    Everyone should make their own sell decisions. Nothing wrong with taking some profits along the way . That said , Im not a seller .

    This deal they made is a game changer , just look at the volume . This stock trades around 50k shares a day ( when I first posted on it, it traded by appointment only lol )

    Yesterday was over 600k

    Thats some brand new big institutional money moving in. Should be some new firms picking up coverage and revising estimates .

    The expansion of gambling is a big theme for me. States are broke and need the revenue . Thats why ERI and GDEN were , and are great stocks to hold . Management is A++



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    Jun 8, 2017 | blog, Blake Sartini |
    Golden Route Operations (GRO) prides itself in the strong relationships we have built with our longtime distributed gaming partners over the years. They count on our expertise in providing third parties with the tools needed when they open new locations.
    At the same time, we have been successful in earning new distributed gaming partners because of our reputation for excellent customer service. We help new business owners understand Nevada’s restricted gaming regulatory structure.
    Over the past six months, GRO, a division of Golden Entertainment, Inc., has expanded our market leading distributed gaming operations in Nevada. We have signed agreements with several dozen locations in the Northern and Southern regions of the state to provide slot machine management services to third-party operated taverns, restaurants, bars and convenience stores. Each location has up to 15 games.
    Golden Entertainment is Nevada’s largest distributed gaming operator with approximately 7,500 games at nearly 700 locations. The company is also Nevada’s largest traditional tavern operator with 54 wholly owned locations statewide.
    Below are locations that are now part of our distributed gaming family:
    SOUTHERN NEVADA
    – A fifth tavern for The Bar in Las Vegas, located at the Trails Village Center in Summerlin.
    – Aces at Warm Springs Road and El Capitan.
    – Proof Tavern, a gaming location at Lake Las Vegas.
    – A second tavern for Great American Pub in Henderson.
    – Henry’s American Grill, a well-established tavern on North Stephanie.
    – Crab Corner southwestern Las Vegas.
    – Bert’s Bar in Las Vegas.
    – Pandora’s Lounge in Las Vegas.
    NORTHERN NEVADA
    – Two Scolari’s grocery stores in Yerrington and Tonopah, giving the company eight locations.
    – Davidson’s Distillery in downtown Reno.
    – Mike’s Mine Shaft, a tavern in Winnemucca.
    – Remedy’s Bar in Carson City.
    – Paddy & Irenes Bar in Sparks.
    – Espolon Bar in Dayton.
    – Whiskey Creek Bar in Lovelock.
    – JM Discount Liquor in Gardnervile.
    At GRO, there is a vibrant market throughout Nevada for distributed gaming opportunities. Our company has the knowledge and experience to help our partners grow their businesses through our distributed gaming management services.
    -Jimmy Wadhams
    Vice President of Route operations for Southern Nevada
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    Golden Entertainment: Stepping Up To The Big Leagues With The ACEP Acquisition

    Jun. 15, 2017 8:49 AM ET|
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    | About: Golden Entertainment, Inc. (GDEN)by: Dan Stringer




    Dan Stringer

    Research analyst, micro-cap, nano-cap, special situations



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    Summary

    Golden Entertainment has continued to grow its business incrementally over the last two years, through expansion to its existing distributed gaming business.
    With its acquisition of American Casino & Entertainment, Golden is making a larger shift to focus on its casino business.
    The market continues to discount Golden, despite its growth and operational success since it came public in 2015.



    It has been an eventful two years for Golden Entertainment (GDEN) since Golden Gaming merged with Lakes Entertainment in 2015. The company has been able to deliver results as it had advertised at the time on its two primary businesses, distributed gaming and casinos.
    Distributed gaming involves the operation and servicing of gaming and amusement devices in many third party locations, as well as in company-owned locations. Golden services over 10,000 devices in the Nevada and Montana markets. Company-branded taverns are also included in this market segment with plans to reach 60 locations in the Nevada area by the end of 2017. Distributed gaming made up 76% of revenues and 65% of segmented Adjusted EBITDA in 2016, making it the biggest component of Golden's business.
    Golden had recently extended out this business with several acquisitions in the Montana market and has been investigating whether Pennsylvania was beginning to open up as a potential market as well. These revenues are typically recurring in nature, with contracts with third parties running at between 5 and 7 years, with Golden experiencing greater than 85% renewal rates on outstanding contracts in the most recent year.
    The casino business consists of 3 casinos around Pahrump, Nevada, which brought in roughly $34.6m in revenue in the last 12 months, as well as a larger operation in Rocky Gap, Maryland that did just over $64m. Since inheriting the Rocky Gap casino from the merger with Lakes, Golden has been able to boost EBITDA margins to 25% from 16.2%. This is very encouraging as Rocky Gap is a much larger operation than the Pahrump casino group. As it turns out, this may have served as the impetus for Golden's latest corporate development.

    Golden made a big step forward in changing its product mix with its June 12, 2017 announcement that it was acquiring American Casino & Entertainment Properties for $850m. This transaction drastically alters the composition of Golden's business, with its pro-forma revenues from casinos now rising from 24% of Golden's total revenues to 61% with its Adjusted EBITDA from 35% to 76%. The ACEP business includes four casinos, most notably the Stratosphere on the Las Vegas Strip:

    Source: Company Presentation
    Golden has put up an investor presentation detailing some of the key aspects to this deal. ACEP has had a checkered operational history, at one point being owned by Carl Icahn before being sold to Whitehall Street Real Estate Funds, an affiliate of Goldman Sachs, in 2008. The company had some difficult struggles during the financial crisis and had to do a large restructuring of its $1.1Bin debt, which involved Goldman eventually acquiring 22% of Whitehall directly.
    The fortunes of the company have clearly turned around since that time, based on its performance over the last year. Golden feels it can add some value to this business almost immediately, as it is projecting $18m in synergies in the next year. It does have a track record with the improvement at Rocky Gap and I can see a few avenues for them to reach this.
    Vertical Integration. The 4 new casinos bring 3,879 gaming devices under the Golden umbrella. Based on Golden's portfolio, I don't believe any of these would have been existing Golden distributed gaming clients. Being able to insource this business should be able to add some to the bottom line.
    Past Performance. Golden was able to improve EBITDA margins by 9% in the last year at Rocky Gap; this was not simply through cost cutting as revenues also increased by over 12%. With over $400m in revenues, Golden would only need to improve margins by about 4% to meet their target, which should be feasible. Golden is no stranger to acquisitions, completing 13 in the last 15 years of operations.

    That said, this acquisition is at a substantially larger scale than anything Golden has done previously. The Aquarius and 2 Arizona Charlie locations are in-line with the type of businesses that Golden currently operates but they have not had a Las Vegas Strip property like the Stratosphere before.
    Headcount. The presentation does not include any personnel cuts in the deal summary sheet for the two operations, but there must be some back office attrition that will occur on the SG&A side that contributes to these savings.
    From a corporate ownership side, I found this transaction interesting. Blake Sartini, CEO and the largest shareholder of Golden, owned 32.6% of the shares prior to this deal. As part of the acquisition, Golden is issuing approximately 4m shares to Whitehall, which will own just over 15% of the company and will have a seat on Golden's board. It was clearly worth it to Sartini to bring on a partner like Whitehall & Goldman Sachs to support the business going forward, even though his stake dilutes down to 27.6%. Taking the view that a slightly smaller share of a much larger pie is a good thing for Golden shareholders.
    This deal is not without risks, though. As noted in ACEP's history, they have been through a tough time before when the Nevada economy struggled during the Financial Crisis of 2008/9. The underlying metrics do seem good for the Nevada economy, which should benefit the new properties:

    Source: Company Presentation
    Golden has leveraged up to make this happen. Although no debt came with the purchase, the cash consideration of $781m was funded via an $800m 1st lien loan, a $200m 2nd lien loan and a $100m revolver as part of a restructuring of Golden's existing debt. Its net leverage will increase to 5.5x after closing, which is more in-line with its region peers like Boyd Gaming (BYD), Eldorado Resorts (ERI) and Red Rock Resorts (RRR). The distributed gaming business does provide recurring business as some buffer to the downside but the company is now more like the other regional operators.

    Valuation
    The company has included a comparison to other local operators with a multiple of 9.2x EV/EBITDA in its investor presentation. Working our way through the revised capital structure:
    Shares Outstanding (pre-ACEP deal) 22.25m
    Shares Issued for Acquisition 4.00m
    Total Shares Outstanding 26.25m
    Current Share Price $20.27
    Market Cap, post-deal $532.12m
    Add: GDEN Debt $178.78m
    Add: ACEP Acquisition Debt $781.00m
    Less: Cash GDEN ($45.20m)
    Less: Cash ACEP ($28.00m)
    Enterprise Value $1,418.70m
    Pro-Forma EBITDA (including synergies) 2018 $192.0m
    EV/EBITDA Multiple 7.39x
    Source: Company Presentations, 10-Q, Press Release
    If we exclude the synergies, the multiple jumps to 8.1x. Both these are still less than the peer multiple mean of 9.2x, which doesn't reflect the rapid growth Golden has produced over the last 2 years. I do believe there is room to re-rate here. The $1.1B re-financing will be leaving the company with about $180m in its coffers, which would allow it to continue with some tuck-in acquisitions to the distributed gaming business or if any capex refresh is required on the new properties.
    The market's response to this deal was very positive, as it was trading at around $17 before the announcement. If the market starts to reward Golden with a regional multiple in-line with the others, shares should re-rate to somewhere between $27 and $33/share, depending on how well Golden can deliver on its proposed synergies. It has a strong track record so I am still willing to bet on Golden, even after the sharp move up.
    If you see something in this article that you agree with, or even better disagree with, please take the time to comment below. This makes all of us better investors. I predominantly focus my investing in the small- and micro-cap company space, but reserve the right to deviate from time to time. If you like what I'm doing, you can follow me by hitting the "Follow" button at the top of this article. Plus, you can follow me in real time by selecting that option.

    Disclosure: I am/we are long GDEN.
    I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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  12. #87  
    RX Senior brucefan's Avatar
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    Golden Looks Golden with Stratosphere Acquisition

    By Staff Sat, Jun 17, 2017



    Golden Entertainment is bidding to become a major player in the lucrative Las Vegas locals market by acquiring American Casino & Entertainment, owner of the Stratosphere and the Arizona Charlie’s casino franchise.
    Armed with $1.1 billion in financial commitments from a consortium of major banks, Golden has agreed to pay $850 million for the three casinos, plus the Aquarius Casino Resort in Laughlin―$781 million of it in cash, the balance in the form of 4 million shares of Golden stock (Nasdaq: GDEN) at a price of $17.05 a share.
    The price represents an 8 times EBITDA multiple pre-synergies and 6.8 times post-synergies, based on American’s estimated 2017 earnings, while presenting Golden with an opportunity to double its annual revenues and triple its EBITDA.
    Golden’s board has approved the acquisition, as has Whitehall Street Real Estate Partners, a private equity fund managed by Goldman Sachs that owns AC&E and will own 15 percent of Golden when the deal closes.
    “We’re seeing a continued consolidation across all regional gaming,” said Union Gaming analyst John DeCree. “That’s just driven by the efficiencies of scale and synergies it produces. The more properties you can own and greater scales you have, the better and more efficient it is.”
    In Golden’s case the acquisition dramatically increases its position in Southern Nevada, where it currently owns three casinos―all in Pahrump, about 60 miles west of Las Vegas―and the Rocky Gap Resort in western Maryland.
    Formed in 2015 through a merger of Las Vegas-based Golden Gaming and Lyle Berman’s Lakes Entertainment, Golden is best known as Nevada’s largest slot route operator, controlling more than 10,000 machine games in more than 900 locations in the state and in Montana. The company also is Nevada’s largest gaming tavern operator, with more than 50 locations, most of them in the Las Vegas Valley.
    With AC&E in the portfolio Golden will own eight casinos, nearly 16,000 gaming devices, 114 table games and more than 5,100 hotel rooms. It will support roughly 7,200 jobs and generate estimated net revenues of $850 million and adjusted EBITDA of $180 million for 2017.
    CEO Blake Sartini termed the acquisition “a transformational event” for the company.
    “In my opinion, these assets are based in the strongest, most stable regional gaming market in the country―Southern Nevada,” he told analysts on a conference call to announce the deal. “Nevada has the most stable tax and regulatory environment anywhere. Nevada, and Las Vegas in particular, is one of fastest-growing regions in regards to population and job growth.”
    “The American properties represent an ideal complement to our existing operations as they strengthen our presence in the Las Vegas locals market while providing us with an iconic destination property on the Las Vegas Strip,” he continued. “Our proven strategy of focusing on guest service, quality food and beverage offerings and effective player marketing will complement the strong existing operations currently at all of American’s properties. In addition, given the recent investment activity focused on the north end of the Las Vegas Strip, we see future potential to develop the approximately 15 acres of excess real estate surrounding the Stratosphere. This acquisition supports our goals for growth in many ways, including the potential to use our increased free cash flow and financial scale to pursue distributed gaming opportunities in existing or potential new markets.”
    The Stratosphere is expected to play a key role in the enlarged company, with its iconic 1,149-foot observation tower and thrill rides serving as a magnet for younger tourists and gamblers. The property also brings with it 15 acres of undeveloped land well situated on Las Vegas Boulevard just above Sahara Avenue.
    Golden says it sees its enhanced Las Vegas positioning as a springboard for larger ambitions.
    “We’re excited about those opportunities in new and existing distributed gaming jurisdictions, and the free cash flow generated from the combined company will undoubtedly help create additional opportunities for us to expand our leading distributed gaming platform,” said CFO Charles Protell.

    “Consolidation in gaming, broadly, has been happening over the past 10-15 years in a bigger sort of way in the regional and Las Vegas Strip side,” said Alex Bumazhny, a gaming industry analyst and senior director for Fitch Ratings. “And in the last years, we’re seeing it more rapidly on the locals side as well.”
    For Berman, who remains a board member of Golden, buying the Stratosphere is the second time around for him. In 1993, his company Grand Casinos bought a one-third interest in the project initiated by then-Vegas World owner Bob Stupak in 1990. A fire in 1993 delayed the opening, but the tallest tower in the United States finally debuted in 1996. Just after opening, the Stratosphere Corp. declared bankruptcy and Carl Icahn came in to take it over and formed American Casino and Entertainment.
    Four properties in the Southern Nevada locals market have recently changed hands.
    In December, Boyd Gaming purchased Aliante Station and earlier in the fall bought the Eastside Cannery on Boulder Highway and the Cannery casino in North Las Vegas.
    Also last fall, Station Casinos completed its purchase of the Palms, which at times has appealed to locals and tourists alike, on Flamingo Road just west of the Las Vegas Strip.
    Last month, SLS on the Strip, while not strictly a locals casino, announced it would be purchased by Alex Meruelo and Meruelo Group, owners of the Grand Sierra Resort in Reno.http://ggbnews.com/issue/vol-15-no-7...form=hootsuite
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  13. #88  
    RX Wizard
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    Very impressive; ty; so who else do ya like..?? Give us mortals a break..ty for all these posts, but I am greedy;what is next GDEN..?? tyia..gl..
    "I don't want to know the odds."..Luke Skywalker.
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  14. #89  
    RX Senior brucefan's Avatar
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    I hope your in GDEN . If not , buy some. The more info I hear the better the story gets . GREAT long term hold

    Keep checking in, more to come
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