Golden Entertainment Surprise Winner in Venetian, Sands Convention Center Deal

Posted on: March 4, 2021, 10:07h. 

Last updated on: March 4, 2021, 10:57h.

Wednesday’s news that Las Vegas Sands (NYSE:LVS) is selling the Venetian and Sands Expo and Convention Center for $6.25 billion is obviously a plus for that company. But that deal is potentially beneficial to other Sin City operators, including a surprising name in Golden Entertainment (NASDAQ:GDEN).

Golden stock
The Strat Las Vegas. An analyst says operator Golden Entertainment could see its shares surge. (Image: Las Vegas Review-Journal)

Roth Capital analyst David Bain says LVS’s decision to part with those venues “highlights other underappreciated Strip assets,” including some held by Golden and Caesars Entertainment (NASDAQ:CZR).

Sticking with GDEN, even a low case valuation derivative of Wednesday’s LVS sale transaction equates to GDEN per share value of over $40, in our view,” said the analyst in a note.

Bain has a $26 price target on the Strat owner. For Golden stock to climb to $40, it would need to add almost 67 percent from the March 3 close. Las Vegas-based Golden operates 10 casinos, nine of which are in Southern Nevada, and the other is the Rocky Gap in Maryland.

Golden Stock Could Glitter

In addition to the Strat, Golden owns an undeveloped parcel of land on the Strip. Bain notes the company’s exposure in the city isn’t comparable to that of Sands.

The Venetian is one of the more plush integrated resorts on the Strip, known for luring an affluent clientele with high-end rooms and swanky retail stores. Additionally, Sands Convention Center drives more visibility and weekday business than is seen at Golden properties. Still, Bain says the LVS transaction is indicative of “potential underappreciation of Golden’s value.”

The Sands deal also may spur “institutional investor interest and confidence in the Strip’s long-term sustainability and earnings power, despite current, well-known COVID-related challenges,” said the analyst.

Golden also owns more than 60 PT’s Taverns across Southern Nevada, and its route business. That unit services gaming devices found in non-gaming venues, such as bars, grocery stores, restaurants, and more.

With a market capitalization of $670.37 million, Golden is classified as a small-cap equity. But it’s a potentially potent name, as highlighted by a six-month gain of 88.55 percent. The Russell 2000 Index, a widely followed basket of small stocks, is up 48.24 percent over the same period.

Compelling Case(s) for Golden Stock

Bain says the total amount of land being sold by LVS for $6.25 billion is roughly 100 acres, whereas the Strat and Golden’s unused Strip property combines for approximately 37 acres.

Based on that, the analyst notes the $6.25 billion Sands sale equals $62.5 million an acre, implying Golden’s Strip land is worth $2.3 billion in a high case scenario.

In a mid-range example, Golden’s Las Vegas real estate assets could be worth $1.48 billion, according to Bain. That’s still more than double the operator’s current market value.

The analyst’s low case is still bright for Golden stock. Assuming 15 percent return on investments made at Strat, that property could generate $65 million in earnings before interest, taxes, depreciation and amortization (EBITDA). At a multiple of 12.8x, that values the venue at $832 million, a sum that doesn’t include the operator’s 17 acres of undeveloped land.