The early reporters are in with second-quarter earnings results and, among regional U.S. casino operators, the numbers have been so predictable as to be boring.
So what did the stocks do? Well, the small ones soared.
Golden Entertainment jumped 4.3 percent on the day after Monarch Casino reported results that were basically as expected. Full House Resorts jumped 5.4 percent and Monarch rocketed 11.25 percent.
That compares to larger regionals of Boyd, Red Rock Resorts, PENN Entertainment and Churchill Downs that held mostly even as Red Rock and Churchill both reported strong earnings and repeated their commitments to what may be the clearest and most credible growth plans in the sector.
So why the divergence?
The answer might be Bally’s Corp. It soared 25.1 percent to $16.91 after agreeing to sell the company to principal owner Standard General for $18.25 per share in a deal that would combine it with now privately held Queen Casino & Entertainment into a new public company.
The stocks of these small regional casino companies are well off their highs. The starkest example of that decline is Bally’s itself. It previously rejected Standard General’s offer of $38 a share for the company. Now it’s jumping at less than half of that.
One reason for investors to move up these stocks is simple valuation. The Standard General offer is 8.5 times Bally’s expected 2024 EBITDA. Monarch, a nearly perfectly managed company that has a cash-positive balance sheet and continues to grow profitability, is selling for around seven-plus times. Golden, riding the demographic wave of the Las Vegas Valley, is under six times. Clearly, their stocks can go a long way up just to match what some might consider a take-under of Bally. Full House has two new transformational properties that, as they ramp up, should make today’s stock price laughable.
Those three companies have other interesting qualities. Full House has its growth prospects, but it also has a bunch of small properties that add to its operational complexity given the company’s small size. Monarch and Golden have their demographic tailwinds and prospects to continue to grow profits as they continue to improve their performance, but they have no clear growth strategies otherwise. All three own their own real estate; and they are all small enough to be gobbled up by an ambitious competitor or even private capital.
For the sake of full disclosure, I own stakes in all three companies and am very happy with the quality and vision of their management. But I can also see where the right offers for one or more of them could be forthcoming.
BID BIDEN ADIEU
This is where I exercise the columnist’s prerogative to make a personal off-topic observation.
As a former political and Delaware state house newspaper reporter, the departure of Joe Biden from the political scene marks the end of an era for me as well as for him.
Throughout my career, Joe had always been there, a charismatic, quick-witted presence with a ready smile and a story to tell. Often, those stories were embellished, and for those of us in Delaware, “that was just old Joe,” we said with a chuckle of understanding, as in response to an entertaining family relative. For those beyond our small borders, that tendency received less tolerance, costing Biden earlier runs for the presidency and, as he aged, concerns that he had aged too much.
In addition to having been a political reporter, I later served as editor of one of Delaware’s two daily newspapers. That created another relationship, a person whose goodwill was to be wooed. In that relationship, my wife and I enjoyed company around the Biden family table as dinner guests on occasion. And then there were nights lifting mugs of beer with Biden staffers listening to Irish folk music at O’Friel’s Irish bar in Wilmington, but that’s another story.
The point is that, in little Delaware, those of us in public life, or in semi-public life like a journalist and/or editor, get to know each other. (As an aside, it’s probably the reason Delaware politics isn’t as poisonous as that in larger states. You’re less likely to slander an opponent who you know by first name and with whom you have many personal connections.)
In gaming, the best known of those connections was with Biden’s longtime friend and fellow Delawarean Joe Asher, currently sports betting chief at IGT. Here’s his take on Biden: “One of the greatest public servants ever and certainly the greatest Delawarean of our nation’s history.”
We can all have different opinions on public policy and, for that matter, different views on whether Joe Biden had aged too much for his job. But after all of these decades of watching him, there are two things I can confidently say about our 46th president: He was always a happy warrior, and his heart was always in the right place.
Or as Joe Asher says: “Those of us who have been fortunate to know him know what a kind and decent man he is.”
