Penn Making All the Right Deals in Gaming (CZR, PENN)

Penn Making All the Right Deals in Gaming

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Click Here Now

The U.S. regional gaming market isn't nearly as strong as markets like Asia or even Las Vegas, but if you're patient and willing to buy at the right time it can still be a decent investment. No one has been more patient and (in my opinion) made better investments in U.S. gaming than Penn National (Nasdaq: PENN ) in recent years.

After stealing M Resort for $230.5 million in 2010, the company announced yesterday that it has bought a casino in St. Louis from Caesars Entertainment (Nasdaq: CZR ) for $610 million. The company said it represented a price 7.75 times trailing EBITDA, indicating the property will add just under $80 million in EBITDA without any growth. Tax benefits make the ratio look even better.

The deal looks good for Penn, but it's questionable for Caesars Entertainment. The company had $2.0 billion in EBITDA in the last 12 months and has $18.8 billion in net debt. That means the company's debt is worth 9.4 times EBITDA. With this sale, even if it pays down debt with the proceeds, Caesars will increase its leverage and reduce its enterprise value/EBITDA ratio.

An eye on regional markets
Penn isn't the only one with an eye on expanding its regional presence. Wynn Resorts (Nasdaq: WYNN ) is looking into a resort near Boston and joins Las Vegas Sands (NYSE: LVS ) and Genting in looking into Miami.

For the right price these could be profitable deals, but Penn is the one making all the right moves under the radar. M Resort appears to be contributing nicely to a jump in profits at the company, and this St. Louis casino is supposed to be accretive as well. If you can be patient, the odds will move to your favor in gaming. Penn National shows it's just a matter of patience, time, and the right balance sheet to make good bets in this industry.

Regional gaming isn't as sexy as Macau, but it's been a profitable move for Penn National. For more stocks that favor the U.S. over China, check out our report called "The Future Is Made in America." The report is free when you click here.

Jeff Fischer and team have demystified options. And they can rack up income like $1,030... $2,626... and $3,228 on a schedule you can set your watch by!
That's why we're glad to announce every single one of their closely guarded strategies is available to YOU during May and June – 100% FREE, no strings attached! Just enter your email address in the box below...

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On May 08, 2012, at 3:40 PM, cp757 wrote:

Travis Adelson said he will not expand in the US and Kraft Group and Wynn Resorts (WYNN) have withdrawn their $1 billion casino proposal. I do find it hard to understand why Loveman would sell the casino in St. Louis with some income when he could have sold the Macau golf course for more money but I am sure he still thinks he will get it approved for gaming. Fat chance. I do agree, in the U.S. PENN is making the best moves.
Report this Comment On May 08, 2012, at 3:41 PM, cp757 wrote:

.
Report this Comment On May 08, 2012, at 4:10 PM, Senescent wrote:

You are absolutely correct Travis. Great deal for PENN and a futile move for CZR. When CZR is under a boatload of debt they cannot float their way out of trouble by selling assets cheaply. As you point out, it only makes things worse.
Report this Comment On May 08, 2012, at 9:33 PM, gainesview wrote:

I've been with PENN since 1992.my first stock. CEO is great...... the only mistake was the defaulted buyout. If the CEO leaves I think I'll sell half of my shares.
Report this Comment On May 08, 2012, at 10:20 PM, cp757 wrote:

gainsview May 2, 1994 you could buy 100 shares and with all the splits you would have 1200 shares. The stock was under a dollar back then so 10,000 shares would have been easy. Now you would have 120,000 shares. At $44.19 that would give you $5,302,800. Good Job. Even if you bought 1000 shares you would have $530,280 dollars.

updated 11 hours ago Sponsored by:
	DOW	15,303.10	8.60	0.06%
	S&P 500	1,649.60	-0.91	-0.06%
	NASD	3,459.14	-0.28	-0.01%

PENN	$56.73		-0.07	-0.12%
Penn National Gami…		CAPS Rating:

CZR	$14.22		-0.39	-2.67%
Caesars Entertainm…		CAPS Rating:

WYNN	$137.90		-0.55	-0.40%
Wynn Resorts, Limi…		CAPS Rating:

LVS	$57.55		-0.25	-0.43%
Las Vegas Sands Co…		CAPS Rating:

3

Penn Making All the Right Deals in Gaming

Don't let it get away!

Comments from our Foolish Readers

Report this Comment On May 08, 2012, at 3:40 PM, cp757 wrote:

Report this Comment On May 08, 2012, at 3:41 PM, cp757 wrote:

Report this Comment On May 08, 2012, at 4:10 PM, Senescent wrote:

Report this Comment On May 08, 2012, at 9:33 PM, gainesview wrote:

Report this Comment On May 08, 2012, at 10:20 PM, cp757 wrote:

Add your comment.

Compare Brokers

Report This Comment

Sending report...

Today's Market

Create My Watchlist

You don't seem to be following any stocks yet!

Related Tickers