Consolidation of the gaming industry has naturally gotten headlines in recent years.
And the mergers have been extensive, involving casinos, suppliers and online companies.
But as in any dynamic businesses, there are also companies that bubble up from the bottom to create new opportunities for stock investors.
Two gaming companies that have made their debut in the past couple of years are Eldorado Resorts and Golden Entertainment. We’ve discussed both of these companies in this space.
They are part of what I call the Nevada Triple Play—three companies (Monarch Casino being the third) that are growth stories based on the sustained population and economic growth of Las Vegas and Reno, and on their own special situations.
To refresh, the special cases for each are:
• Eldorado consolidating three properties in downtown Reno and improving operations at the three MTR Gaming properties it acquired. More recently, Eldorado announced the purchase of Isle of Capri, an acquisition that will double the size of the company and present it with more MTR-like opportunities to improve profit margins.
• Golden Gaming is a play on expansion of its restricted gaming license and tavern business in Las Vegas and the proliferation of slot routes throughout much of the country.
• Monarch is transforming its eponymous casino in Black Hawk, Colorado, into a destination resort. If it is as or more successful as the market’s only other such property, Pinnacle’s Ameristar, Monarch the casino will also be transformational for Monarch the company.
The stocks of all three are up since they were first mentioned here, but they also have room to grow as the companies grow.
The supplier side of the industry hasn’t had a new public company come on the scene in a while, but that appears likely to change soon.
AGS is acting more and more like it’s ready to go public, publishing investor presentations and appearing at investor conferences.
AGS is owned by private equity firm Apollo Global Management, which almost by definition, owns companies in order to sell them, or monetize through an IPO.
AGS also has leadership with public company experience, starting with CEO David Lopez, former CEO of what is now Everi and COO of Shuffle Master when it was an independent and public company. SHFL Entertainment as it later was named, is now owned by Scientific Games.
AGS has been in growth mode—buying Class II slot supplier Cadillac Jack, moving into the proprietary table game business, starting a social casino, moving assertively into Class III markets and producing a poker card shuffler in what could be just the first challenge to the Shuffle Master monopoly in that product line.
There has even been speculation that AGS might be interested in buying Shuffle Master from Sci Games, which would put Lopez back home and in charge. It could also bring some focus and cash to sprawling Scientific Games where debt reduction is a priority.
That is a lot of change since AGS was known as American Gaming Systems and operated only as the provider of Class II slot machines to Indian casinos.
At present, AGS is gaining some heft. It has more than 20,000 slot machines on lease and 1,200 table games in the field. Todd Eilers of Eilers & Krejcik Gaming estimates that AGS will generate $206 million in revenue and $78 million in EBITDA next year.
The lion’s share of that comes from slot machines, but social casino and table revenues are growing.
