Century Casinos Defies Downturn with Promising Long-Term Investment Prospects

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Gaming equities, including Century Casinos, endured across-the-board depreciation Wednesday in view of the unexpectedly higher March reading of the Consumer Price Index (CPI), a key inflation indicator. This downturn emerged despite otherwise promising remarks from a financial analyst on the broader prospects of Century’s stock performance.

Macquarie analyst Chad Beynon offered a favorable forecast on Century in his latest report, upgrading the regional casino stock’s status from “neutral” to “outperform” with a maintained price target of $5. A cloes of $3.27 today puts this target at a potential growth of more than half within the near future.

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Beynon energetically contested the recent downward trajectory of Century’s stock, which, having reduced by 32% since the close of the prior year while the Russell 2000 Index experienced a 2% increase, he pronounced as excessive.

Comparing Century’s performance in the last year and a half with that of other operating companies (OpCos)—businesses that don’t own the entirety of the real estate housing their establishments—Beynon pointed out that while OpCos have decreased by about 30% and the stock of integrated companies (WholeCos) increased by around 30%, Century’s shares have seen the most significant reduction, making it “the cheapest OpCo in our coverage universe,” in Beynon’s words.

Despite its struggling shares, Century is increasingly seen as a strong long-term investment, with the rewards of patience likely to become apparent by 2025. Beynon predicted an earnings before interest, taxes, depreciation, and amortization (EBITDA) of $168 million on revenues of $700 million in the coming year for Century. This optimistic forecast also includes a possible 85 cents-per-share return in free cash flow for a company with a $101 million market capitalization and a $3.27 share price.

The Missouri, Maryland, and Reno establishments of Century were identified by Beynon as potential areas for swift and promising stock growth.

Beynon placed emphasis on the anticipated investment value and growth potential of Century, pointing to two renovation projects expected to yield a return in the mid-teens on an $82 million expenditure. Further medium-term growth is predicted to stem from the acquisitions of the Nugget tavern and Rocky Gap Casino Resort.

In terms of leverage, Century ended the previous year with a ratio of 4.9x, projected to rise to 5.6x by year’s end due to the expansion plans in Missouri and investments in new properties. Despite this predicted short-term increase, Beynon noted that the leverage ratio should decrease to 4.8x, the largest one-year reduction amongst comparable businesses in Macquarie’s coverage.

With the prospective reduction in debt coupled with an effective approach being taken at the Maryland and Reno properties, investor confidence is expected to be buoyed, thus fostering the long-term potential and value in Century’s shares according to Beynon.