4 Reasons Century Casinos Shares Are A Buy

David Bain of Aegis Capital starts coverage of Century Casinos, Inc. CNTY with a Buy rating and $9.30 price target, saying the company is underfollowed and underappreciated as a mid-market casino developer and operator with both near-term and long-term catalysts.

4 Reasons For Buy Rating

Bain’s bullish thesis on the stock is based on the following:

1. “We believe shares have not appropriately priced its Century Mile Casino development (final approval likely in 30 – 45 days), which we believe is worth ~$1.30 per share.”
2. “We value existing operations (pre-Century Mile) at ~$8 per share based on a blended 7.3x CY18 EV/EBITDA. This represents a 5+ percent discount to the average current trading value of domestic regional casinos.”
3. “CY18 forecasted net leverage (less cage capital) is ~1.3x and even with its Century Mile development, forecasted CY18 net leverage would only rise to ~2.6x. We anticipate 1 to 2 accretive acquisition or development announcements this year, offering additional potential upside to our price target.”
4. “We view management as prudent and capable of identifying and executing on lesser known gaming opportunities both in North America and Internationally.”

The key near-term catalyst is the potential approval to build and operate Century Mile, a one-mile race-track with casino entertainment on Edmonton International Airport land and adjacent to a 415,000 square foot premium outlet mall scheduled to open later this year.

Bain expects the $40 million project could show a capital return of over 25 percent and he assumes 20 percent as his base-case return for valuation purposes.

At last check, shares of Century Casinos rose 5.73 percent to $7.38. The $9.30 price target implies a a 33 percent gain from March 9 close.

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