Post of the Day
April 06, 1998
From our AOL
Trump Hotels & Casino Board
Subject: Have the #s changed?
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.
- The company has $1.8 billion of debt, not $1.75 billion as was said on its conference call .
- The company sold $100 million of additional debt late last year.
- 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)
- Despite selling $100 million of debt, the company's year-end cash position declined from $176 million in 1996 to $140 million in 1997.
- 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.
- 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...|
- Congress is shutting down paired-share REITs, which should eliminate any prayer equity holders had of a REIT buying DJT.
- 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.
- Delaware recently approved another 1000 slots in each of its casinos, which means more competition.
- 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?