Description
Full House Resorts is a regional gaming operator. The company currently operates 5 casinos (4 on real estate that is owned or leased and 1 located within a hotel owned by a third party). A sixth property, Chamonix Casino Hotel, is being built adjacent to one of its existing properties in Colorado and is expected to open in 2Q’23 while a seventh recently announced project in Illinois is slated for completion by 2025. As these new development projects come to fruition, EBITDA will grow substantially from the current run-rate of its legacy properties (~$50m). These new developments will also make FLL a scale operator in the regional gaming space warranting a multiple re-rate in line with larger regional gaming peers.
In addition to its casino properties FLL benefits from 6 permitted sports betting skins (3 in Colorado and 3 in Indiana). Other companies operate the sports betting sites and FLL is paid a percentage of revenues subject to annual minimums. This revenue flows to EBITDA at nearly 100%.
From FY’22E to FY’25E, EBITDA can grow at a 45-50% CAGR based on $175-200m of EBITDA in FY’25 (assuming Waukegan casino is fully operational by 1Q’25). EBITDA should roughly double next year in FY’23 to ~$120m as the Chamonix Casino is operational for half the year and the Waukegan temporary casino is operational for a full year. This translates to ~75m of FCF (45m combined for interest, tax, maintenance capex) or a 23% FCF yield at the current stock price. At a 15% FCF yield this translates to ~$14/share on a 12 month horizon (+54% upside), with much more substantial upside over a longer period ($20+) as the Waukegan project fully contributes.
Chamonix Casino & Hotel (Cripple Creek, CO)
This is a higher-end casino resort being built adjacent to the company’s Bronco Billy’s property. Cripple Creek is ~20 miles south of Colorado Springs with a regional population of ~1m. The addition of a higher-end property with additional recreational amenities is expected to drive greater overnight visits which in turn drives higher GGR. The construction budget was revised in January 2022 from $180m to $250m (to reflect supply chain issues, inflation, and a difficult construction environment) and the property is expected to open in 2Q’23.
American Place (Waukegan, IL)
In December ’21 FLL announced that its proposal was selected by the Illinois Gaming Board to develop and operate a new casino and entertainment destination in Waukegan, Illinois (~35 miles north of downtown Chicago), subsequent to a competitive selection process that began in 2019. Waukegan is ~30 miles from the nearest competitor casino and would serve a population of ~1m, including several affluent suburbs.
The facility is under construction and a temporary casino is set to open this summer, pending regulatory approvals. FY’22 will include ~$100m investment in the temporary casino, which includes upfront gaming license payments and purchase of slot machines that will be transferred to the permanent casino once opened.
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Catalyst
EBITDA growth as development projects are completed