Golden Entertainment Stock Sags, But Exec Sees Coronavirus Impact not Proportionate to Equity Valuation

Posted on: March 13, 2020, 11:29h. 

Last updated on: March 16, 2020, 11:55h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Golden Entertainment, Inc. (NASDAQ:GDEN) is following other gaming stocks to the downside Friday after the Strat operator reported a fourth-quarter loss of 28 cents a share, above the consensus estimate of 20 cents.

Strat owner Golden Entertainment reported decent Q4 results, but investors are focused on coronavirus impact. (Image: Twitter)

The company reported revenue of $242.13 million for the last three months of 2019, easily topping Wall Street’s forecast of $210.13 million. But on Friday, investors appeared to be focusing on how frequently Golden management mentioned COVID-19 on the earnings conference call and the impact of the outbreak on the operator’s business.

Obviously, at this time, it is tough to handicap the duration and severity of the coronavirus. But we aren’t seeing any impact to our business that is remotely proportionate to the impact on our equity valuation,” said CFO and President Charles Protell on the call.

Las Vegas-based Golden operates 10 casinos, nine of which, including the Strat, are in Southern Nevada. The other is the Rocky Gap in Maryland.

Nevada Coronavirus Impact

The bulk of Golden’s Silver State properties outside of the Strat cater to locals, a segment many analysts viewed as sturdy prior to the outbreak of the coronavirus in the US.

Local and regional casinos account for about 80 percent of Golden’s earnings before interest, taxes, depreciation and amortization (EBITDA). Alone, the Strat accounts for 20 percent of the company’s property level EBITDA.

Protell notes that last weekend, the Strat was entirely booked, and just seven percent of that property’s guests hail from outside the US. Still, the emphasis on catering to locals at Golden’s other venues could be challenging in today’s COVID-19 environment.

The number of confirmed cases of the respiratory illness in the Silver State rose to 11 on Thursday, prompting Gov. Steve Sisolak to declare a state of emergency.

Las Vegas Mayor Carolyn Goodman offered a fiery rebuke of media coverage surrounding COVID-19, saying the press is keeping tourists away from Sin City, claiming that “the media is absolutely destroying us.”

Reassuring Investors

Like other gaming stocks, Golden has been slammed this month, entering Friday down 61.74 percent since March, and more than 66 percent below its 52-week high. But CEO Blake Sartini looked to reassure skittish investors on the call.

“I’d like to remind everyone I am the largest shareholder of Golden Entertainment and have an obvious interest, along with all other shareholders, to see our valuation grow,” he said. “I can’t control the coronavirus and unfortunately don’t have a cure.”

Sartini reiterated that while Golden owns the Strat, it’s not a Strip company, and that it has one of the highest free cash flow yields in the industry.

In terms of liquidity, a hot topic in the gaming sector at the moment, Golden has $112 million in cash on its balance sheet and access to a $200 million credit revolver, which the operator currently hasn’t drawn against.