Century Casinos finishes under expectations in third quarter
Analysts with Union Gaming (UG) had expected Century to report adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.8 million. The FactSheet Consensus estimate had put the number at $8.2 million. What Century reported, however, was just $7.1 million.
The weaker performance, according to the casino operator, was partly due to lower sales at Century Mile, which only opened recently. UG’s John Decree points out, though, that this was only the second full operational quarter for the venue and expects management to already be looking at ways to curb costs in order to improve the margins and explains, “We remain confident [Century] management will successfully ramp the property in 2020. We anticipate the slower-than-expected ramp at Century Mile will be offset slightly by the opening of Century Downs’ casino floor expansion in a couple of weeks, which should drive incremental revenue with high flow through. As a result, we’ve decreased our 2020 EBITDA estimate at Century Mile by 16% and increased our estimate at Century Downs by 4%. Overall, our EBITDA estimate in Canada goes to USD$29.4 (down from USD$30.3m).”
In addition, UG was forced to slightly lower its expectations for Century’s pro forma adjusted EBITDA for next year. Instead of the $66 million that was previously forecast, it bumped the number down to $65 million and gives the company a price target of $10.50, a 7.0x multiple of the 2020 estimate.
Century has been maintaining operations in Poland for a number of years and this could prove to a very lucrative location for the company. Decree emphasizes that Poland’s gaming market has continued to improve and is 28% stronger than it was in the third quarter of last year. This will give Century’s flagship property in the country’s capital of Warsaw an injection of revenue that it needs and adds that this improvement could continue for the next couple of years.
That amount will need to be greater in order to offset anticipated losses of Century’s Bath Casino in the U.K. Driven by stricter regulations and a tougher market, gambling revenue virtually across the board has fallen in the country and Bath Casino won’t be able to avoid the contraction. Its EBITDA, according to Decree, will be -$2.4 million this year.
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