Monarch Casino Eyeing Atlantis Reno Enhancements, Possible Dividend

Posted on: October 19, 2022, 10:25h. 

Last updated on: October 20, 2022, 01:44h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Monarch Casino & Resort (NASDAQ:MCRI) announced today it is planning to renovate the second hotel tower at Atlantis Casino Resort Spa Reno early next year and is mulling paying a dividend.

The gaming company made those declarations in conjunction with reporting record-breaking third-quarter results after the close of US markets. Reno-based Monarch reported earnings per share of $1.41 on revenue of $133.73 million for the September quarter, as adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 28%.

Over the last year, with the completion of Monarch Black Hawk expansion, we have continued to fine-tune all aspects of our business and are operating more efficiently and effectively than ever before,” said co-Chairman and CEO John Farahi in a statement.

Monarch owns just two casino-hotels — its namesake venue in Black Hawk, Colo. and Atlantis in Reno.

Monarch Renewing Reno Focus

Monarch doled out $400 million to enhance its Colorado venue. It’s a move the operator says is paying off in terms of increasing share in one of the West’s most competitive gaming markets outside of Las Vegas. Following some additions to its Reno property, the company is looking to do more at that venue.

“Atlantis continues to deliver strong results. Our primary focus remains the ongoing enhancement of the property. Guests’ response to the recently upgraded and redesigned rooms in the first hotel tower has been very positive,” added Farahi.

New entrants to the market, including Bally’s and Century Casinos, could allocate capital to sprucing up familiar venues in Reno-Tahoe. That could potentially lure more visitors to the region in the process.

Monarch Balance Sheet, Dividend Possibilities

Monarch ended the third quarter with $33.1 million in cash, a $27 million balance on a term loan, and no outstanding debt tied to a $70 million credit facility.

Farahi noted the gaming company is “evaluating a full range of capital allocation options, including potential share repurchases under our existing 2.9 million share repurchase authorization and potential dividend.”

Monarch currently doesn’t a pay a dividend. But these days, that’s commonplace in the gaming industry. The company went public in 1993, and hasn’t paid a quarterly distribution over that time. But doing so could bring in a new crowd of investors, particularly because it’s a small-cap stock. Small-cap equities are usually more volatile than larger counterparts. But dividends are known to blunt some of that turbulence, regardless of market capitalization. It’s also possible that Monarch could be a takeover target.

“On the M&A front, the list of ‘suitable’ acquisition targets remains slim (barring a macro downturn bringing new sellers to the table), though we believe MCRI remains an attractive takeout candidate potentially presenting a different avenue for investors to get paid. All-told, we see attractive risk-reward at present levels despite macro uncertainty, with likely catalysts for price discovery in the coming quarters,” said Stifel analyst Jeffrey Stantial in a note out this evening.

He upgraded the stock to “buy” from “hold.”