- Monarch delivered strong fourth-quarter earnings on Wednesday, driving share prices higher
- A strong balance sheet has Monarch considering new acquisitions
- Monarch currently owns two properties — Atlantis in Reno and Monarch Casino in Black Hawk, Colo.
Shares of Monarch Casino & Resort (NASDAQ: MCRI) surged Wednesday after the gaming company delivered fourth-quarter earnings and revenue that topped Wall Street forecasts.
Co-Chairman and CEO John Farahi noted the operator continues to mull mergers and acquisitions (M&A), though he didn’t provide much detail regarding Monarch potentially considering buyouts of rivals or purchases of individual properties.
We believe that Monarch’s strong balance sheet and free cash flow favorably positions the Company to continue investing in its properties and paying cash dividends,” he said in a statement. “The Company has been diligently evaluating potential M&A transactions, which we believe could drive additional long-term value for our stockholders.”
Monarch runs just two casino hotels — Atlantis in its home city of Reno, Nev., and an eponymous venue in Black Hawk, Colo. By number of properties, the company is the smallest publicly traded casino operator in the US.
Monarch Has Previously Teased Acquisitions
For investors familiar with Monarch, Farahi’s refrain about acquisitions is familiar. It’s an issue frequently mentioned in conjunction with the company’s quarterly earnings reports.
However, no deal has materialized as of yet, confirming management is highly selective and won’t initiate a purchase simply for the sake of increasing the size of its portfolio. That is to investors’ benefit because it indicates Monarch is a good steward of shareholder capital.
Still, the company has the resources with which to execute deals. It had $58.8 million in cash on hand at the end of last year and nothing drawn on a revolving credit facility, indicating the company could potentially do a deal without issuing corporate debt. Some market observers believe Monarch will eventually announce a purchase.
“Additionally, we highlight revised verbiage around capital allocation in the press release, which we believe could signal perceived M&A opportunity,” said Stifel analyst Jeffrey Stantial in a new report. He rates the stock a “hold” with a $90 price target, up from $80, but that new price objective is below where the shares trade at this writing.
Colorado Source of Strength for Monarch
Monarch Casino’s namesake Black Hawk property is the freshest integrated resort in the town and one of the highest-end gaming venues in the state. Its contributions to the operator’s top and bottom lines are noteworthy because Black Hawk is one of the fastest-growing casino markets in the country.
Stantial noted there are signs Monarch’s Colorado casino is proving adept at keeping some VIPs in the state and away from the Las Vegas Strip. In that market, there’s only one other venue comparable to Monarch — Penn Entertainment’s (NASDAQ: PENN) Ameristar.
“Given a stable competitive environment and only one other casino of scale in Black Hawk-Central City (Ameristar), we believe MCRI continues to benefit from strong pricing power for Monarch BH’s market-leading amenities despite broader consumer sensitivity – evidenced by consolidated hotel revenues up +8.3% year-over-year in Q4,” adds Stantial.
The post Monarch Casino Mulling Acquisitions, Sees Strength in Colorado appeared first on Casino.org.
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