Twin River Sees Encore Boston Harbor Pressure Abating, Uses Stock Weakness to Repurchase Shares

Posted on: November 15, 2019, 11:19h. 

Last updated on: November 17, 2019, 07:30h.

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

Twin River Worldwide Holdings, Inc. (NYSE:TRWH) has been plagued by the addition of Encore Boston Harbor to the New England gaming scene. The Rhode Island company’s stock tumbled almost 22 percent since the Wynn property debuted in neighboring Massachusetts.

Twin River CEO George Papanier sees opportunity outside New England and value in his company’s stock. (Image: Providence Journal)

As expected, Twin River posted weak third-quarter results, sending the stock tumbling by six percent on Friday. But the company has been taking advantage of that weakness to repurchase a massive amount of its shares, and executives believe the worst of the competitive pressures from the new Wynn venue are behind it.

Overall, the market: New England only grew approximately 9% in the third quarter,” said TRWH CEO George Papanier on a conference call with analysts and investors. “We believe that our competition’s spend for market share during the quarter is unsustainable.”

TRWH’s namesake property in Lincoln, R.I. has been most affected by the new Wynn venue. But the company’s other Ocean State venue, the Tiverton Casino, and Dover Downs in Delaware delivered solid third-quarter results.

“When you think about it, our market right-sized $130 million Tiverton Casino project generated as much profit in its first quarter of operations as the $2.6 billion competition (Encore Boston Harbor) did,” said Papanier.

When Wynn Resorts delivered third-quarter results earlier this month, the company said earnings before interest, taxes, depreciation and amortization (EBITDA) at Encore Boston Harbor were $7.7 million, well below Wall Street’s estimate of $15 million.

Taking Advantage Of Weakness

With Friday’s tumble, TRWH stock is lower by almost 24 percent year-to-date, making it one of the worst-performing names among regional gaming equities. Making that decline appear worse is that the company has only been public since late March, not the entire year.

The silver lining for investors is that TRWH management is taking advantage of weakness in the stock to repurchase a significant amount of shares, something the company has been doing with regularity this year.

“During the third quarter, the Company also repurchased 4,071,711 shares of its common stock for approximately $88.8 million,” according to a statement.

Buying back stock lowers the amount of a company’s shares outstanding, thereby increasing its earnings per share (EPS).

Glimmers Of Hope

“As of November 1, 2019, TRWH had $70M remaining under its commitment to return up to $250M of capital directly to stakeholders,” said Stifel analyst Brad Boyer in a note Friday obtained by Casino.org. “With the stock continuing to trade at a relatively compelling valuation, and with TRWH scheduled to close on several value-enhancing acquisitions over the next four to five months, we would not be surprised to see the company continue to deploy the remainder of its available capital over the next several months.”

Previously overlooked in the Twin River thesis is the company’s increasing Colorado footprint. The operator already owned Arapahoe Park before announcing the acquisition of three casinos in the Centennial State earlier this year, prior to the recent passage of sports betting there.

“In Colorado, we were very pleased that Proposition DD recently passed, which will result in us obtaining three sports betting licenses in the state upon closing of our Black Hawk acquisition,” said Papanier. “These licenses were not contemplated at the time we entered into the acquisition and represent unexpected upside to what we felt was already a compelling strategic and accretive transaction.”