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In a report published Monday, ISI Group reiterated its Hold rating on Penn National Gaming
PENN, but slightly lowered its price target from $44.00 to $43.00.
ISI Group noted, “PENN's shares rose 28% on Friday as investors considered the potential equity value creation of the announced PropCo / OpCo split, in which PENN would engineer the world's first gaming-related REIT. In our view, the value creation comes down to three key things, two of which are tangible and one of which is theoretical: 1) the Fortress preferred swap is approximately 10% accretive to EPS; 2) tax efficiency results from the elimination of $150-200mm in annual corporate taxes, with the commensurate annual payout to shareholders being taxed (for the most part) at the ordinary income rate; and 3) in theory, a higher trading multiple would be ascribed to the REIT (PropCo) because of its tax and cost of capital advantages.”
Penn National Gaming closed on Friday at $48.23.
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