Golden Entertainment outlined a $140 million plan to make over the Stratosphere, a property included in last year’s acquisition of American Casino and Entertainment Properties, and posted an increase in revenue but a net loss for the fourth quarter on Thursday.
The company’s earnings call centered on the Stratosphere, which Golden Entertainment added to its portfolio, along with two Arizona Charlie’s hotel-casinos in Las Vegas and the Aquarius in Laughlin, Nevada, in the $850 million American Casino acquisition, which closed in October.
Golden Entertainment CEO Blake Sartini said during the call that the continuing improvement of the northern Strip in Las Vegas, including the Genting Group’s Resorts World project, the expansion of the Las Vegas Convention Center, and the investment to complete the former Fontainebleau project will all likely bring infrastructure improvements and customer traffic that would boost the Stratosphere.
“There’s an excellent regional economic backdrop for our company,” Sartini said, “and Golden has multiple paths for growth, both organically and through (mergers and acquisitions) and we are positioned for another year of strong results.”
Sartini outlined the Stratosphere renovations, which will come in three phases through 2021, and feature upgrades of 1,100 rooms (half the property’s total), the adding of convention space and a refresh of the casino floor.
This year, he said, 317 rooms will be remade, 75 percent of them by the early third quarter. This year’s efforts will also add a new gastropub, linked to a new race and sports book; and new signs, among other upgrades. In all, the company said, $32 million is budgeted for this year’s improvements.
“By the time we are done,” Sartini said, “we will have touched every part of the property inside and out and added new amenities.”
The company said it will by year’s end have added six new taverns, bringing its total to 63. Sartini added that the company has 16 acres of land around the Stratosphere, leaving room to expand.
In the fourth quarter, meanwhile, Golden Entertainment lost $13.4 million, or 53 cents per diluted share, for the fourth quarter ended Dec. 31 compared with net income of $10 million, or 44 cents per diluted share, a year earlier. Expenses related to the American Casino acquisition drove down the most recent results, Chief Financial Officer Charles Protell said during the conference call.
The most recent results missed the 5 cents-per-share profit forecast by analysts polled by Yahoo Finance.
Adjusted earnings before interest, taxes, depreciation and amortization, or ebitda, more than doubled to $29 million from $12.2 million. Revenue growth at the company’s Rocky Gap casino near Cumberland, Maryland, and contributions from the acquired American Casino properties fueled the growth, the company said, helping to offset declines in room occupancy and rates at the Stratosphere following the Oct. 1 mass shooting on the Strip.
The company estimated the post-shooting softness at the Stratosphere may have swung fourth-quarter EBITDA by $2 million to $3 million.
Contributions from the acquired American Casino properties helped lift fourth-quarter revenue, which rose 75 percent to $184.4 million from $105.4 million, and casino operations, which rose to $101.2 million from $24.1 million a year earlier.
Analysts have been optimistic about Golden Entertainment. In February, Seeking Alpha reported Union Gaming set a $40 price target, representing a 26 percent upside potential for shares, for Golden Entertainment.
“GDEN remains one our top picks in the sector and offers investors an attractive valuation for Las Vegas locals exposure,” analyst John DeCree wrote about the stock.
This month, Tesley Advisory Group rated the stock “outperform.”
For the 12 months ended Dec. 31, Golden Entertainment posted net earnings of $2.1 million, down from $16.3 million a year earlier. Full-year revenue rose 26.2 percent to $509 million from $403.2 million.
Golden Entertainment shares rose 49 cents, or 1.71 percent, Thursday to close at $29.21 on the Nasdaq.
