Thank you guys for sending me your ideas and letting me post it. I’ve been super busy with work, spreadsheet upgrades and other projects.
Will Morrissett sends in this stock analysis of Century Casinos.
There are a handful of reasons for the stock’s mispricing. First, the industry is unattractive as an effect of the obvious macroeconomic situation. Gambling is considered a loser of the ‘new normal’, the delivering consumer, persistent unemployment rate, jobless recoveries, increasing taxes, etc, etc.
Second and more company specific, CNTY has changed dramatically over the past few years; this has created a sense of uncertainty around the company’s future.
Over the past couple of years the company has sold operations in Prague and South Africa and taken a large write down of it operations in Poland.
On the other side of this coin, it has picked up a depressed operation in Canada and inked new cruise ship deals. These changes have shrouded the company’s future in uncertainty which analysts and Wall Street can’t handle.
Luckily, I don’t have to ‘know’ what will happen to the future EPS, EBITDA, margins, and blah blah to buy CNTY because the assets are cheap, the balance sheet is clean, management is incentivized and a handful of catalysts are available.
In theory that should provide a decent margin of safety while waiting for improved operations.
Government tax increases, tightening of gaming regulation; economic sensitivity; new acquisition fails to improve operations enough to justify price and capex.
Moderate barrier to entry in form of government licensing; market/currency diversity, Polish market share; captive cruise customers.
Buybacks; new operations will slowly provided clarity in revenue, FCF, earnings, etc. ; any improvement in unemployment rates/economic conditions; potential of additional cruise ship contracts; improved margins in Colorado; management changes in Polish operations; increase in institutional ownership (current estimate= 48%). Company is cheap enough to be an acquisition target (no evidence of this currently).
Note: Shares are listed both in US and Austria
The author, Will Morrissett has a long position in CNTY