Is Monarch Casino a Small-Cap Gaming Winner?http://www.fool.com/investing/general/2013/10/24/is-monarch-casino-a-small-cap-gaming-winner.aspx Michael Lewis
October 24, 2013
Monarch Casino and Resort (NASDAQ: MCRI) is a lesser-known and small player in the gaming world, but investors interested in the space likely know its key properties. The company, which owns the Atlantis Resort and Casino in Reno, Nev. (not to be confused with the one in the Bahamas), reported earnings on Tuesday. Figures on both the top and bottom lines showed improvement over the year-ago quarter, and showed a fifth quarter of consecutive growth. The company only owns two properties, but generates cash and, like its bigger casino brethren, is seeing growth in the core gambling business. Should you take a turn on Monarch Casino and Resort?
The company's adjusted EBITDA climbed just under half a million dollars, to $12.78 million -- a 3.6% gain.
The Monarch Black Hawk is solely a gaming facility. However, the city council has paved the way for the company to develop it into a full-scale resort, complete with more than 500 hotel rooms, a spa, and four restaurants. For comparison, Atlantis currently has around 875 hotel rooms, eight restaurants, and plenty of entertainment and shopping spaces.
Many domestic regional casinos have had trouble in recent periods, with the exception of Monarch and one other. Does this mean that Monarch is doing something right?
Pinnacle looks far cheaper than Monarch on an earnings basis -- 7.6 times forward earnings versus Monarch's seemingly rich 18.6 times. However, when taking debt into consideration (Pinnacle has billions of it from the merger), Monarch trades at an EV/EBITDA of just 8.8 times, whereas Pinnacle trades at more than 12 times.
As of the end of September, Monarch had approximately $17.5 million in cash, and $56.3 million in long-term debt. As the company builds out the Black Hawk facility, investors should keep a close eye on earnings growth. M