Century Casinos ‘Attractive’ Idea for Margin Expansion, Pent-Up Demand Bets, Says Analyst

Century Casinos (NASDAQ:CNTY) stock surged 9.43 percent on Friday, racing to a new 52-week high. That came a day after the regional gaming company reported fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) that beat Wall Street forecasts.

On Thursday, the Colorado-based gaming company reported adjusted EBITDA in the October through December period of $18.7 million, up 227 percent from the year earlier period. Temporary closures of the operator’s venues in Canada and Poland led to a miss of analysts’ revenue estimates. But investors clearly cheered the EBITDA beat and Century’s developing margin expansion story.

We think CNTY remains an attractive way to invest in the margin expansion and pent-up demand thesis we have highlighted across our research, with shares trading at just ~7x despite most peers testing record multiples,” said Stifel analyst Steven Wieczynski in a note to clients Friday.

He rates Century stock a “buy” and boosted his price target on the name to $12 from $9, implying upside of almost 20 percent from the March 12 close. Investors appeared to applaud that revelation, as well as the shares climbing on more than double the average daily volume yesterday.

Plenty of Catalysts for Century Stock

Up nearly 116 percent over the past year, the regional gaming company is still one of the smallest publicly traded casino operators in the US, with a market capitalization of $276.25 million. However, that metric belies what some market observers believe is a big-time story.

“The catalyst path to re-rate higher looks rich, with a Poland sale and further US acquisitions both potential 2021 events,” said Wieczynski.

In the US, Century’s roster consists of casinos in its home state of Colorado, as well as Missouri and West Virginia. As of Dec. 31, 2020, the company had $63.4 million in cash and cash equivalents on its balance sheet. That stockpile increased $8.6 million in a year.

Bullish Outlook

Century management noted margin expansion trends can prove long-lasting, and it’s optimistic that as more folks in the 55-and-up age demographic receive COVID-19 vaccinations, traffic trends at its US properties will continue improving.

“Management noted Q1 results in the US are encouraging thus far, though February was impacted by ~7-10 days of adverse weather. CNTY’s US assets are likely pacing ahead of our prior model,” said Wieczynski.

Century stock could use the benefit of a strong recovery at domestic gaming venues, because, as Wieczynski notes, Canadian casinos could remain closed until April 15, and it’s possible the Poland properties are shuttered again.