Century Casinos found itself in the red on April 10 following the release of higher-than-expected US Consumer Price Index (CPI) figures, signaling concerns about persistent inflation. However, despite the market’s reaction, one analyst remains optimistic about the company’s prospects.

Macquarie Analyst Predicts 53% Upside for Century Casinos

Macquarie analyst Chad Beynon, in a recent report to clients, upgraded Century Casinos from “neutral” to “outperform,” setting a price target of $5 per share. This represents a potential upside of nearly 53% from the current closing price of $3.27. Beynon believes that the recent selloff in Century’s stock, which has seen a 32% decline since the end of last year, is unwarranted.

While the broader market has seen modest gains, Century Casinos’ stock has experienced a significant decline, making it the cheapest operating company in Macquarie’s coverage universe. Beynon attributes this undervaluation to market misconceptions, particularly regarding Century Casinos’ real estate ownership structure.

Century Casinos, operating primarily in regional markets, has faced headwinds but also possesses significant growth potential. Beynon forecasts the company to achieve $168 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on revenue of $700 million next year. 

Notably, Century Casinos could generate 85 cents per share in free cash flow, an impressive feat given its current market capitalization of $101 million.

The analyst identifies several catalysts that could drive Century Casinos’ rebound, including the opening of The Riverview, Poland’s re-licensing, and the completion of Caruthersville. Additionally, recent acquisitions such as Rocky Gap and Nugget are expected to contribute to medium-term growth.

Strategic Moves Propel Century Casinos Amid Leverage Challenges

Despite concerns about rising leverage due to expansion plans, Beynon remains confident in Century Casinos’ ability to deleverage, marking it as the largest one-year deleveraging opportunity in Macquarie’s coverage. 

The company’s renovation projects and strategic acquisitions are anticipated to yield attractive returns, positioning Century Casinos as a unique value and growth opportunity in the market.

Notably, Century Casinos reported strong fourth quarter and full year 2023 results, with a notable increase in adjusted EBITDAR and net operating revenues.

Despite a slight dip in earnings from operations for the year, the company’s expansion efforts in the US and successful acquisition strategies position it for a bright future, according to co-CEOs Erwin Haitzmann and Peter Hoetzinger.However, investors may need to exercise patience, as Century Casinos’ resurgence is projected to be a 2025 story. However, with a strong earnings outlook and potential catalysts on the horizon, the company’s long-term prospects appear promising.

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High-profile NA gambling company Century Casinos has completed the sale of its Edmonton and Calgary real estate assets to Vici Properties subsidiaries in a CAD 221.7 million ($162.31 million) agreement. The deal has allowed Century Casinos to secure significant proceeds and adjust its lease agreement with VICI.

Streamlining Efforts Should Pay Long-Term Dividends

Century Casinos first inked the sale-leaseback deal in May, hoping the transaction would “unlock the real estate value” of the operator’s Canadian portfolio. The agreement with VICI saw the operator sell four of its assets in Edmonton and Calgary, adding them to the existing triple-net master lease agreement between the two companies.

As a result of the sale, annual rent increased by CAD 17.3 million ($12.67 million). The agreement also extended the master lease term to 5 years with the option for four 5-year renewals and capped the annual rent increase to 2.5%. Century Casinos co-CEO Peter Hoetzinger was optimistic that the extra capital would aid the company’s long-term plans and growth ambitions.

“This transaction provides us with the ability to pay down our debt and with greater financial flexibility as we continue to grow.”

Peter Hoetzinger, co-CEO at Century Casinos

Accounting for various expenses and taxes associated with the sale leaves Century Casinos with approximately CAD 154.5 million ($113.08 million). Some of these funds will be allocated as payments to Century Downs minority owners but should still be sufficient to significantly improve the operator’s financial standing and open new opportunities. 

The Operator Remains Highly Competitive

Century Casinos’ restructuring efforts perfectly align with its rising revenues to bolster its competitiveness. Directing resources toward expanding and optimizing its core gaming operations should result in significant returns and maximize shareholder value. The strategic realignment also strengthens Century Casinos’ bond with Vici Properties, leveraging their mutually beneficial lease agreement to foster sustained growth.

Overall, the Edmonton and Calgary real estate asset sale marks a significant milestone for Century Casinos, helping it retain its regional leadership position. This strategic move underscores the operator’s determination to remain at the forefront of the gaming sector while exploring new avenues for innovation and development.

As Century Casinos continues to evolve and adapt to the changing dynamics of the gaming industry, the company remains committed to providing unparalleled gaming experiences and driving positive outcomes for its shareholders and stakeholders. The operator will continue delivering outstanding gaming and entertainment offerings to its patrons, positioning itself for a bright future of growth and expansion.

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Century Casinos, a major NA gambling company, has penned a definitive sale-leaseback deal with VICI Properties. The deal will see the former company sell the assets of four of its properties in Alberta, Canada.

The properties in question are Century Casino & Hotel Edmonton, Century Casino St. Albert and Century Mile Racetrack and Casino in Edmonton, Alberta and Century Downs Racetrack and Casino (“Century Downs”) in Calgary, Alberta.

The aggregate purchase price of the deal is $164.4 million in USD (based on the exchange rates at the time of the deal). The purchase price includes $142.6 million to be paid to Century Casinos’ subsidiaries and $21.8 million to acquire the fee simple real estate interest in Century Downs.

Century Casinos forecasts retaining around $114.6 million of the purchase price.

The Deal Will Be Added to the Existing Master Lease

The four properties, referred to in the deal as the Century Canadian Portfolio, will be added to the existing triple-net master lease agreement between Century Casinos and VICI Properties. As a result, the annual rent will increase by $12.8 million, which translates into an implied acquisition capitalization rate of 7.8%.

Meanwhile, the property-level rent coverage ratio under the Master Lease agreement will be around 2.0x. In addition, the term of the Master Lease will be extended to 15 years after the closing of the latest agreement.

Century Casinos will guarantee its obligations under the lease.

The deal, subject to regulatory approvals, is expected to close in the second half of the year.

The Higher-ups Are Excited about the Arrangement

Century Casinos’ co-chief executive officers, Erwin Haitzmann and Peter Hoetzinger, released a statement on the new sale-leaseback, saying that they are pleased to extend their partnership with VICI Properties.

The two executives said that the transaction will “unlock the real estate value” of the operator’s Canadian portfolio. At the same time, it will allow the company to grow its local footprint, while providing it with improved financial flexibility.

The co-CEOs announced their intentions to continue making the most out of Century Casinos’ capital, teasing some of their future plans:

We intend to use the sale proceeds to fund improvements at the Nugget and for general corporate purposes. We are also looking at the potential to apply some proceeds to paydown debt under our credit agreement and/or to return funds to shareholders through stock repurchases and/or a special dividend.

Erwin Haitzmann and Peter Hoetzinger, co-CEOs, Century Casinos

Century Casinos currently shared data concerning its financial performance in 2022, highlighting a double-digit growth.

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Gaming and hospitality operator Century Casinos released today its fourth quarter and full year 2022 financial report, posting increases in revenue and EBITDA despite the decline from US operations.

Net Operating Revenue, Adjusted EBITDA

Net operating revenue for the three months ended December 31, 2022, was $103.75 million, down 3% from $107.3 million registered in the fourth quarter of 2021, mainly due to the decline of 9% in revenue from US operations that could not be offset by the increase in Poland. Revenue from operations in Canada remained almost unchanged.

For the full-year 2022, net operating revenue posted an increase of 11% to $430.53 million ($388.5 million in 2021) due to the significant increase in Canada (54%, to $71.57 million) and Poland (55% to $58.23 million) was more than enough to offset the 5% decrease in the US to $268.58 million.

“We finished 2022 with record net operating revenue and Adjusted EBITDA despite disruptions and temporary closures at our Caruthersville property due to low water levels in the Mississippi River,” wrote co-chief executive officers of Century Casinos, Erwin Haitzmann and Peter Hoetzinger.

Century Casinos reported a 16% decrease in earnings from operations for the quarter and a 1% decrease for the full year. In both readings, the consolidated result was driven down by the company’s US performance which recorded decreases of 31% in Q4 and 21% for the year. Earnings from operations in Canada and Poland increased by 20% and 22% in the quarter, and 153% and 2178% for the year but nominally these results were too small compared to the US.

Adjusted EBITDA for the quarter was down 13%, to $21.67 million, and up 6%, to $103.34 million, for the year. The main component influencing both results was the operations in the US but the increases in Canada and Poland, together with the significant drop in the company’s Corporate division, were more than enough to lead to a positive full-year EBITDA reading.

Developments in Missouri and Nevada

“In December 2022, we completed the relocation of the Caruthersville casino from the riverboat and barge to the land-based pavilion where we will operate the casino until the casino and hotel development project is complete,” continued Haitzmann and Hoetzinger in their comments.

Experiential real estate investment trust (REIT) VICI Properties agreed to provide the funds for the new casino project comprising a casino and 38-room hotel tower in Caruthersville, Missouri, in exchange for ownership of the real estate improvements and rent increase under the master lease once the property is operational.

Another important development mentioned by the co-CEOs was the unanimous recommendation of the Nevada Gaming Control Board to the Nevada Gaming Commission to approve the company’s application for the acquisition of the Nugget Casino Resort.

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