Monarch Casinos & Resorts (NASDAQ: MCRI) is exploring alternatives so as to add to its two actual property portfolios by means of acquisitions.
Co-Chairman and CEO John Farahi made the feedback within the firm’s second-quarter earnings press launch after the U.S. market closed on Wednesday. Primarily based in Reno, Monarch now owns its eponymous venues in its dwelling metropolis of Atlantis and the burgeoning Blackhawk, Colorado market.
We proceed to guage potential acquisition alternatives the place we are able to leverage our improvement and operational experience in a financially prudent method,” Farahi mentioned in a press release.
He didn’t elaborate on particular areas Monarch is contemplating getting into. He additionally declined to say whether or not the corporate had held discussions with potential sellers.
A monarch may very well be a purchaser…or a vendor
Monarch On line casino ended the quarter with $35.1 million in money available. That is an inexpensive quantity for a corporation with a $1.41 billion market capitalization, however the numbers additionally recommend the operator will probably have to challenge bonds or fairness to affect a takeover.
As for the opportunity of Monarch signing a deal within the brief time period, every little thing is feasible. Nevertheless, administration is believed to have a excessive diploma of selectivity to learn traders, and the present excessive rate of interest setting is unsuitable for debt-driven M&A exercise.
“Whereas stringent administration necessities make an acquisition tough, however not unimaginable, to execute within the present M&A setting, the flexibleness of MCRI’s stability sheet may present distinctive acquisition alternatives even in a recession,” Stifel analyst Jeffrey Stanshall mentioned in a be aware to purchasers.
Stanshall added that Monarch may very well be an acquisition goal as a consequence of its “prime quality belongings and unsure long-term succession plans.” He has a Purchase ranking on the inventory, with a worth goal of $91, suggesting a 30.5% acquire from present ranges.
The place Monarch can discover offers
Assuming Monarch would not wish to add properties to the markets it already operates in, the up-and-coming neighborhood sector thins out from there, and even smaller, on condition that the corporate most likely is not a candidate for a property on the Las Vegas Strip.
Administration will probably proceed to “goal underinvested belongings in high quality markets (secure provide, affordable tax charges, and drivers of regional financial development).” These alternatives are extra restricted, barring macroeconomic headwinds that spark extra alternatives,” Stanshall mentioned.
Three gaming markets match the invoice when it comes to favorable tax offers and native financial development: Blackhawk, Central Metropolis and Cripple Creek in Northern Nevada and Colorado. These areas even have the benefit of being situated in states with rising populations, which is a vital function for native on line casino operators.
Conversely, different giant gaming states equivalent to Illinois and Louisiana are shrinking in inhabitants. Nevertheless, Louisiana has the benefit of neighboring Texas, which doesn’t enable on line casino video games.
