Century Casinos (CNTY) – Hello Reno!
In late-February, this regional casino operator announced it was acquiring Nugget Casino Resort for $195M from Marnell Gaming. This property, located just a few miles from the Reno-Tahoe International Airport, consists of 50,200 square feet of casino space, 859 slot machines, 29 table games, 1,382 hotel rooms and seven dining venues. According to B. Riley, the Nugget Casino Resort had net operating revenue of $100.4M and Adjusted EBITDA of $32.8M based on preliminary results for the year ended December 31st, 2021.
With this purchase, Century will join the likes of Monarch Casino & Resort (MCRI) and Caesars Entertainment (CZR) with exposure to the Reno market. As illustrated below, B. Riley analyst David Bain points out that CY21 Reno Gross Gaming Revenue (GGR) was at its highest level since 2008. Visitor volumes, even though they are still well-below preceding years, are climbing while there continues to be increased gaming spend. The analyst also points out that while Nugget’s mix of locals is approximately 20%, they believe its concert amenities and location cluster on Virginia Street (~10 minutes north of MCRI’s Atlantis and 6 minutes south of CZR’s offerings) will serve as an increasing longer-term locals draw. Finally, Reno’s housing price index is at an all-time high and its population growth is amongst the nation’s highest.
Stifel believes that the CNTY investment thesis continues to get cleaner and more approachable for U.S. focused investors as they estimate the U.S. will account for 73% of Adj. EBITDAR, followed by Canada at 20% and Poland at 7%. Now, speaking of its non-U.S. assets, the company has been in discussions for some time now on selling its assets in Poland. On its last earnings call, Co-CEO Peter Hoetzinger would comment:
“In Poland, that sales process continues. It runs, but it runs quite slowly. Several parties are showing interest on and off basis. But we are finding ways. These operations are pretty valuable. They produce nice results.”
Meanwhile, in January, the company announced that it entered into a definitive agreement to sell the land and building it owns in Calgary, Alberta, Canada to Rowanwood Financial Properties for C$8.1M, or $6.5M. Roth Capital believes that longer-term, they see an opportunity to sell its Canada assets as management focuses on the U.S.
Finally, it should be noted that the company will be reporting their Q4 earnings tomorrow morning, March 8th. While we will certainly get updates on the recent Nugget acquisition, Poland sale, as well as Canada sale, management will also provide color on its casinos in Missouri and West Virginia. According to B. Riley:
“MO continues to be on-track for a BH23/early CY24 benefit from a new land-based casino (vs. current river boat) and room capacity, amongst multiple other new/improved amenities. We continue to calculate at least a 20% return on CNTY’s MO investments, most of which is not included in our CY24 forecast. In WV, checks cite strong returns from CNTY’s recent slot floor reconfiguration and upgrades/adds (such as electronic table games), and redone areas, including its center bar and VIP area. CO continues to benefit from strong feeder market tailwinds in Colorado Springs and Denver.”
