They've been saying the stock is cheap all along. I think they meant it.
Monday morning, Station Casinos
As we said in July, management had been aggressively buying back stock, and at prices that may not have been obviously cheap to outsiders. Through nine months, the Las Vegas locals' casino company had repurchased 12.7 million shares for a total of $880 million, and from prices as high as $80 per share all the way down to the stock's lows in the mid-$50s.
And here's what I mean by not obviously cheap: Even at $57 per share (its price in July), the company was trading at 10 times 2007 EBITDA; at $82 per share, or with a total enterprise value of $7.3 billion, the company is trading at 11.2 to 12 times management's revised guidance for 2007 EBITDA of $610 million to $650 million.
But here's the point of debate: Station Casinos also has land held for development that it claims is worth $997 million to $1.4 billion. And including $175 million in advances to its tribal partners, the company has $1.17 billion to $1.59 billion ($19.03 to $25.88 per share) in value not accounted for by property EBITDA. Back this out, and the Fertittas' $82 bid price works out to a more reasonable-looking range of 8.8 to 10 times 2007 EBITDA.
Naturally, when the stock goes from $80 to $53 in four months and the company has been buying back the stock the whole way, investors are going to question whether management has been overpaying with shareholder cash. But $82 per share in cash says that the Fertittas no longer have to care what anybody else thinks about the buybacks.
Of course, that is not going to be the end of the story. Station Casinos' stock has already shot past $82 on the announcement, suggesting that investors expect more bids to roll in. Shares of Boyd Gaming
For related coverage, check out:
- Is Station Casinos a Buy?
- $25 Billion Buyout Offer for Harrah's No Good
- A Penn National Bid for Harrah's?
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