Analyst: Full House still swinging away for a new development

September 19, 2019 9:41 AM
  • Howard Stutz, CDC Gaming Reports
September 19, 2019 9:41 AM
  • Howard Stutz, CDC Gaming Reports

Regional casino operator Full House Resorts was described recently as a company with “grand ambitions for a new development.”

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Recent shots on goal, however, haven’t hit the back of the net.

In a Sept. 12 research note, Macquarie Securities gaming analyst Chad Beynon said the Las Vegas-based Full House has several growth opportunities centered on its Indiana and Colorado casinos.

Full House Resorts’ proposed Illinois casino

Full House is also taking another swing on the development side, this time making a pitch for one of the new casino licenses in Illinois. The company is proposing a boutique hotel and casino for the city of Waukegan, midway between Chicago and Milwaukee, which would have 1,500 slot machines, 60 tables and a 20-room hotel that would be a “high end” property.

“If you look at most of the existing casinos around Chicago, they’re really grind places. Nobody has really tried to focus on the high end,” Full House CEO Dan Lee said on the company’s Aug. 8 second quarter earnings call.

Beynon told investors last week Full House’s main focus is the expansion of Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado, which the company purchased for $30 million in 2016.

Full House has a two-stepped expansion planned for the property. The initial phase is a $15 million parking garage currently under construction, which is expected to open the first half of 2020. The second piece – a $115 million development to include hotel rooms, a spa, convention space and other entertainment – still needs financing.

“Full House is in a tough position, in our view,” Beynon said. The company’s leverage is five times its cash flow and the stock price is down 4% year-to-date, “which leaves investors worried about potential dilution.”

Shares of Full House closed Wednesday at $2.06 on the Nasdaq, up 2 cents or 0.98%.

Beynon said Full House management “is keenly aware” of the concerns from investors.

“Given management’s deep experience in gaming and development, we trust that they will not jeopardize the company and dilute the shareholder,” Beynon said.

Along with Bronco Billy’s, Full House operates two small casinos in northern Nevada, Rising Star, in Rising Sun, Indiana, and Silver Slipper in Bay St. Louis, Mississippi, along the Mississippi Gulf Coast.

During the Aug. 8 call, Lee called Silver Slipper “the story of the quarter,” highlighting the additions the company has made to the property and its location an hour from New Orleans. He said Silver Slipper is “the closest casino to the 400,000 people who live on the north shore of Lake Pontchartrain.”

Lee said Silver Slipper’s sports wagering business, which is managed by William Hill US, contributed $443,000 in operating income to the casino for the first half of 2019.

Beynon said the concern for Full House is Indiana’s Rising Star. The property has seen cash flows decline from $10 million in 2012 to $2.8 million in 2018.

However, multiple initiatives geared toward cost savings and driving revenues are underway at the property. Improvements have included staffing changes, redoing the buffet, improving valet parking, new restaurants, and a free ferry service that shuttles customers from population centers in western Ohio across the Ohio River to the southeastern Indiana casino.

“While the individual impact of each change may be small, the cumulative effect could be meaningful, and we like that management is clearly thinking about ways to improve the business,” Beynon wrote.

Full House is hopeful sports betting will become a business driver in Indiana as it has been in Mississippi. The company has signed deals with European-based Smarkets for online sports betting and with Churchill Downs, which will include a sportsbook at Rising Star.

Although the company had to act quickly on the Illinois opportunity, Lee is hopeful, even with competition expected from five other operators.

Lee likened the Full House proposal to Red Rock Resort in Las Vegas. The Station Casinos property has a healthy slot machine business and upscale amenities.

“We would have the preeminent accommodations and restaurants and so on to try to capture the high end of all the gaming that’s done in Chicago and with a good and important asset for Waukegan,” Lee said.

Full House made several attempts in the last few years to develop a second casino-resort in Indiana but has so far been shut out. A $200 million racetrack-casino proposal in New Mexico ended this summer when the state’s racing commission killed the process.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.