Analyst Optimistic About Century Casinos Amid Market Turbulence

Century Casinos found itself in the red on April 10 following the release of higher-than-expected US Consumer Price Index (CPI) figures, signaling concerns about persistent inflation. However, despite the market’s reaction, one analyst remains optimistic about the company’s prospects.

Macquarie Analyst Predicts 53% Upside for Century Casinos

Macquarie analyst Chad Beynon, in a recent report to clients, upgraded Century Casinos from “neutral” to “outperform,” setting a price target of $5 per share. This represents a potential upside of nearly 53% from the current closing price of $3.27. Beynon believes that the recent selloff in Century’s stock, which has seen a 32% decline since the end of last year, is unwarranted.

While the broader market has seen modest gains, Century Casinos’ stock has experienced a significant decline, making it the cheapest operating company in Macquarie’s coverage universe. Beynon attributes this undervaluation to market misconceptions, particularly regarding Century Casinos’ real estate ownership structure.

Century Casinos, operating primarily in regional markets, has faced headwinds but also possesses significant growth potential. Beynon forecasts the company to achieve $168 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on revenue of $700 million next year. 

Notably, Century Casinos could generate 85 cents per share in free cash flow, an impressive feat given its current market capitalization of $101 million.

The analyst identifies several catalysts that could drive Century Casinos’ rebound, including the opening of The Riverview, Poland’s re-licensing, and the completion of Caruthersville. Additionally, recent acquisitions such as Rocky Gap and Nugget are expected to contribute to medium-term growth.

Strategic Moves Propel Century Casinos Amid Leverage Challenges

Despite concerns about rising leverage due to expansion plans, Beynon remains confident in Century Casinos’ ability to deleverage, marking it as the largest one-year deleveraging opportunity in Macquarie’s coverage. 

The company’s renovation projects and strategic acquisitions are anticipated to yield attractive returns, positioning Century Casinos as a unique value and growth opportunity in the market.

Notably, Century Casinos reported strong fourth quarter and full year 2023 results, with a notable increase in adjusted EBITDAR and net operating revenues.

Despite a slight dip in earnings from operations for the year, the company’s expansion efforts in the US and successful acquisition strategies position it for a bright future, according to co-CEOs Erwin Haitzmann and Peter Hoetzinger.However, investors may need to exercise patience, as Century Casinos’ resurgence is projected to be a 2025 story. However, with a strong earnings outlook and potential catalysts on the horizon, the company’s long-term prospects appear promising.