Post of the Day
April 06, 1998

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Trump Hotels & Casino Board


Subject: Have the #s changed?
Author: JDavid38

Strange things continue to happen to DJT.

In its year-end press release, the company reported 1997 EBITDA of $246 million (Wall Street projections a year before were actually for close to $300 million). In the recently filed 10-K, however, EBITDA somehow slipped to $232 million. How can his be? Let's go to the documents.

Cost and expenses were reported in DJT's year-end press release at $806.6 million. In the 10-K, they' morphed into $810.3 million. General and Administrative expenses had been reported at $265 million. In the 10-K, they mysteriously ballooned to $271 million. Development costs of $4.6 million were also slipped into expense in the 10-k.

As far as I can tell, this company is trading at the highest multiple of any gaming stock in the market.

With 36 million shares, a market cap of $324 million, and debt of $1.8 billion, DJT has an enterprise value of $2.124 billion. With 1997 EBITDA of $232 million, DJT is selling for 9 times last year's EBITDA - and revenues are already down in 1998. As far as I can tell, this company is trading at the highest multiple of any gaming stock in the market.

Once people start poring through the 10-K, here's what else they'll find.

  1. The company has $1.8 billion of debt, not $1.75 billion as was said on its conference call .
  2. The company sold $100 million of additional debt late last year.
  3. Despite announcements of buyback authorizations, the company actually has more shares outstanding (22.7 million, not counting Trump's shares) at the end of 1997 than 1996 (20.8 million)
  4. Despite selling $100 million of debt, the company's year-end cash position declined from $176 million in 1996 to $140 million in 1997.
  5. The company still has an obligation to spend another $53 million of funds on its Gary Indiana casino (see p. 56). This casino, by the way, now boasts the lowest revenue of any boat in the state.
  6. For some reason, Trump has pledged his stock to a lender. "A foreclosure on all of such collateral could result in a change of control of THCR," the 10-K reads. Hey, I thought this guy was a billionaire. Oh well, I guess he's not. (see p. 74)

All of the above took place last year. What about 1998??? Things are not getting better.

I simply cannot fathom why this company - which is highly leveraged, faces increasing competition, and has disappointed investors so much in the past - should command a multiple of 9 times 1997 EBITDA...

  1. Congress is shutting down paired-share REITs, which should eliminate any prayer equity holders had of a REIT buying DJT.
  2. As the TMF Parlay has pointed out on the gaming board, DJT's revenues fell about 6% 1Q 1998, which would mean $20 million less of revenue, and probably 10 million less of EBITDA for the first quarter of 1998.
  3. Delaware recently approved another 1000 slots in each of its casinos, which means more competition.
  4. Caesars is expanding its casino this summer which means more competition.

DJT can't borrow anymore, and it will have approximately $220 million of interest expense this year. It can't put cap ex into its properties, which means continued deterioration. Interest coverage is getting thinner and thinner.

I simply cannot fathom why this company - which is highly leveraged, faces increasing competition, and has disappointed investors so much in the past - should command a multiple of 9 times 1997 EBITDA, especially since it's facing flat to down EBITDA this year! That's the highest valuation of any gaming company I'm aware of right now.

What am I missing here. Can someone explain why this thing is still at $9?


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