After soaring more than 23 percent this week, Century Casinos (NASDAQ:CNTY) is up 106 percent year-to-date. That easily makes it one of the best-performing gaming equities.
Those just now discovering the regional casino operator can take heart, because analysts see more upside coming for the shares. In fact, it was analyst commentary that sparked some of the stock’s surge this week, as B. Riley’s David Bain initiated coverage of the gaming equity with a “buy” rating and an $18 price target. That implies appreciation potential of about 38 percent from the April 30 close.
CNTY’s properties are locals-based, which we believe are benefiting from multiple drivers in the current environment, including the vaccine drive and fiscal stimulus,” said Bain in a note to clients.
Those factors, coupled with the stock’s ascent, confirm analysts and investors are prizing Century for its US exposure, because the shares are soaring even as the operator contends with temporary closures of venues in Canada and Poland.
In the US, Century’s roster consists of a pair of casinos in its home state of Colorado, as well as Missouri and West Virginia.
While Century’s portfolio of domestic properties is small compared to some rivals in the regional casino space, the operator is beloved by some analysts because management has a reputation for effectively integrating bolt-on acquisitions.
At the end of last year, the company had $63.4 million in cash on hand, and with Century stock soaring, it has currency to go shopping. Plus, there’s the widely expected sale of its Poland assets, which should bring in extra cash for deal-making. B. Riley’s Bain says the gaming company could imminently return to its acquisitive ways, and that could potentially trigger more than doubling of the share price.
“CNTY represents a scarce casino operator value play that could potentially double earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) through domestic acquisitions by CY23E, creating per-share value of over $28, in our view,” said the analyst. “We believe CNTY’s next US casino acquisition will be announced before the end of 3Q21, creating an estimated per-share value of $4, not reflected in our price target.”
Bain says Century is likely reviewing “multiple US regional casino acquisition opportunities,” but he didn’t get into specifics.
Another imminent catalyst for Century is implementation of higher betting limits and introduction of new table games in Colorado. That came about via passage of Amendment 77 last November, and analysts and operators believe the removal of the $100 bet cap will help casinos in the state capture a longer-staying, higher-end clientele.
Another advantage for Century is that its domestic venues are heavily frequented by locals — demographics that are looking to spend stimulus cash and get out of the house after getting coronavirus vaccinations.
“We believe locals casinos are currently benefiting from pent-up demand, increased capacity allowances, the COVID vaccine rollout (driving a key older demographic back to the casino), close-to-home entertainment, fiscal stimulus, and structural margin augmentation,” said Bain.