Century Casinos Inc. ( CNTY) Partners With Circa Sports Throwing Down The Gaunlet In US Sports Gaming Market

Singular Research

June 20, 2020 at 11:39 PM·5 min read

Century Casinos Inc. ( CNTY) Partners With Circa Sports Throwing Down The Gaunlet In US Sports Gaming Market

Summary

Partnership with Circa improves long term growth profile.

All casinos now reopened.

Stock is attractively priced relative to industry group comps.

Data by YCharts

Looking to rebound from a $45.9 million first-quarter loss delivered by the coronavirus pandemic, Century Casinos (NASDAQ:CNTY) reopened five gaming properties in Canada as of June 13, following casino openings in Missouri and West Virginia, while plans to reopen two casinos in Colorado came to fruiation June 15.

Headquartered in Colorado Springs, Colo., Century Casinos (CNTY) has pleased most shareholders, returning 32 percent on investment over the last three years, though earnings per share have disappointed analysts and shareholders would like to see CEO salary more in line with the median.

In April, Century partnered with Las Vegas-based Circa Sports to bring internet sports gambling to Colorado. The 15-year agreement with Circa creates a strategic opportunity for added revenue as online sports betting is projected to surge to $20 billion by 2024. Terms of the deal include a market access fee, share of net gaming revenue and minimum revenue guarantee payable to Century each year.

Circa Sports ( privately held) Chief Executive Officer Derek Stevens said his team “simply hit it off” with Century’s management team, and he felt the companies were a good fit for each other.

Stevens, who owns Golden Gate and The D casino-hotels in Las Vegas and is developing the Circa hotel, sees Colorado as an ideal place to expand his sports betting footprint outside of Nevada. Colorado voters in November approved legislation for sports wagering to start May 1.

“The market question is still to be determined as there are a wide range of projections for Colorado, but we think Circa Sports will assume a solid position within the Colorado market,” Stevens said.

Century and Circa submitted applications with the state of Colorado to obtain necessary licenses before May 1. The Circa Sports TM Mobile sports betting app, which launched in May, will operate in association with one of Colorado’s master licenses for sports wagering held by Century Casinos subsidiaries.

Circa is certainly interested in partnering with other gaming properties throughout the United States, depending upon a favorable regulatory environment, Stevens said.

Competitive strategy

With its tagline, “Where the Pros Play,” Circa intends to find a unique niche in Colorado, even as it competes with betting platforms such as DraftKings (DKNG) and FanDuel, which currently operate in several states that offer legalized online sports wagering.

“We plan on taking larger limits than most, similar to what we do in Nevada,” Stevens said. “We will also offer some unique products such as cross-sports parlays, something that has been extremely popular in Las Vegas.”

There is growing speculation that more states will legalize online sports gambling to replenish coffers that were drained by the economic shutdown brought on by the virus. Legislators will be looking at every possible revenue source following the pandemic, Stevens believes.

“Sports wagering is still in its infancy in the United States,” he said. “The percentage of states that will allow sports wagering will continue to increase in the next 24 months.”

Reopening casinos

Century Casinos Co-CEO Peter Hoetzinger said the company was hoping to reopen its casinos in Cripple Creek and Central City, Colo., in mid-June, but that has yet to happen. Century also owns casinos in Missouri, West Virginia, Canada, Poland and England. It operates pari-mutuel off-track horse betting networks in Alberta, Canada.

The company in May opened its eight casinos in Poland, and resumed operations in June at casinos in Edmonton, St. Albert and Calgary, Alberta, as well as Century Mile Racetrack and Casino and Century Downs Racetrack.

Prior to reopening, Century Casinos implemented comprehensive sanitizing and social distancing protocols based on Alberta Health Services guidelines and newly established industry standards.

In its May 20 first-quarter earnings report, Century reported net operating revenue and EBITDA were negatively impacted by the company’s acquisition of Mountaineer Casino and Racetrack, Century Casino Cape Girardeau and Century Casino Caruthersville in Missouri.

The COVID-19 pandemic crushed first-quarter operations, which included a $33 million impairment of goodwill and casino licenses.

“During these unprecedented times, our primary focus is the health, safety and well-being of our team members, guests and communities,” Century Casinos Co-CEOs Erwin Haitzmann and Peter Hoetzinger commented in the earnings report.

“Through the end of February, we were encouraged by the strength of our operations and the significant growth in net operating revenue and adjusted EBITDA driven in part by our recent acquisition of properties in Missouri and West Virginia. We look forward to reopening our properties and we plan to meet or exceed all safety requirements set forth by health officials.”

Improved growth outlook

Century’s strategic partnership with Circa may be leveraged to include all present and future US properties , subject to state approvals, combined the recent strategies acquisition of properties from El Resorts Inc. (ERI) creates a attractive investment opportunity in CNTY.

Century Casino (CNTY) trades at lower price to book value .88 vs 2.56 and lower price to sales ratio at .66 to1.47. than the casino/resort industry group. Current Wall Street mean estimates call for 25% long term eps growth and a twelve-month price target of $7.75.

Disclosure: I am/we are long CNTY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Free trial offer: https://seekingalpha.com/author/singular-research#regular_articles

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