Posted on: November 8, 2022, 02:56h.
Last updated on: November 8, 2022, 05:10h.
The Full House Resorts (NASDAQ: FLL) investment thesis revolves largely around the operator’s new casino pipeline.
Those efforts, including American Place in Waukegan, Ill. and Chamonix in Cripple Creek, Colo., are taking shape and could pay dividends as soon as next year. On the company’s third-quarter earnings conference call with analysts late Monday, Full House management said it expects a temporary version of the American Place casino hotel in Waukegan to be operational in January. That’s while Chamonix could open in mid-2023.
Recognize Waukegan has probably, but certainly the permanent one will be bigger than our whole company and the temporary one might be bigger than our whole company. So it’s pretty significant,” said Full House CEO Dan Lee on the call.
He noted that three casinos within 30- to 90-minute drives of Waukegan generate $120 million to $600 million in annual revenue. The Temporary by American Place will feature 1,000 slot machines and 50 table games. Those gaming assets will be transferred to the permanent venue when it opens. American Place will be the only casino in Lake County, Ill., which is home to more than 700K residents.
Full House Colorado Progress
Upon opening, American Place and Chamonix are likely to be the plushest casino resorts in the Full House portfolio.
In Colorado, that’s a favorable trait, because the gaming market is being reshaped by the addition of more table games and higher betting limits on those offerings. That’s helping some operators lure higher-end customers who spend more on food and beverage, rooms, and of course, gaming.
“The drywall is going up in some areas. The glass is up on a lot of the building. The brick is up in the lower parts of the building. We have had some challenges,” said Lee in reference to Chamonix. “There are three different hotel towers there, for example. They are erected with medium gauge steel.”
Full House is also refurbishing its Bronco Billy’s Casino, which is located near the Chamonix site.
“FLL’s Cripple Creek development is tracking to a ‘mid-2023’ opening, where we model mid-to-late 3Q. Chaminox CapEx peaks in 1H23, and the budget is largely locked in,” wrote Roth Capital analyst Edward Engel in a note to clients. “Even if the project is not 100% complete by mid-2023, we see potential for a phased opening where some hotel rooms and F&B outlets open in late 2023.”
New Projects Could Lift Full House Shares
While Full House’s third-quarter results from its legacy operations weren’t impressive, the addition of the aforementioned Colorado and Illinois casino hotels could be credible catalysts for earnings before an interest, taxes, depreciation and amortization (EBITDA) bump in 2023.
“We model ~$132M 2024E EBITDA which implies combined EBITDA from CO/IL developments reaching 85% of FLL’s targets. Our forecasts imply FLL trading at 5x 2024E EBITDA and see shares rerating as CO/IL EBITDA becomes more tangible and balance sheet concerns subside in 2023,” concluded Engel.
He rates the stock a “buy” with a $10 price target, down from $11.