With a market value of just $78.60 million, Full House Resorts (NASDAQ:FLL) is one of the smallest publicly traded gaming companies in the US. But that diminutive stature may belie exciting upside potential with the stock, according to one analyst.
Even with a jaw dropping 40 percent gain over the past week, Full House stock trades at $3.45 at this writing. But Roth Capital analyst David Bain outlines a scenario where the shares could eventually flirt with $12, or more than triple current levels. The analyst says if the operator is successful in winning a license to develop a gaming property in Waukegan, Ill., that alone would be worth $4.81 a share.
Previously, reviews had FLL’s Waukegan proposal positioned as the highest-ranked, overall,” writes the analyst in a Monday note to clients. “The only category where FLL did not receive the highest possible ranking was ‘financial data,’ essentially known/secured capital for its proposed development.”
Bain points out Full House now has a commitment letter from a multi-billion-dollar investment firm to fund the Prairie State venture. The Nevada-based company’s roster is currently small, consisting of just five venues, one each in Colorado, Indiana, Mississippi and two in the Silver State. That underscores the importance of winning an Illinois permit, because the state is one of the largest gaming markets in the country.
Land of Lincoln Catalyst
Should it emerge victorious in its quest for a Prairie State license, Full House would not only add another venue, but bolster its exposure to fast-growing sports wagering markets. That’s something the operator already has via its Colorado and Indiana properties.
Bain says the company procuring a letter of commitment from an investor is the “third leg” in the process, and positions Full House as more likely to be chosen than not. The analyst says the Illinois Gaming Board (IGB) is meeting with investment bankers to help with the licensing decision, a process that could take six months. But he adds it’s possible the Waukegan license will be awarded in the first quarter of 2021.
In addition to Full House, IGB is considering bids from North Point Casino and Rivers Casino Waukegan.
Path to Double Digits
Bain’s price target on Full House stock is $7, or more than double where it currently trades. That forecast is arrived at by estimating the name trades at 5.6x 2021 earnings before interest, taxes, depreciation and amortization (EBITDA). The analyst projects the operator’s online sports betting revenue stream, which requires almost no spending on the company’s behalf, will check in at 15x.
The base case scenario of a Waukegan development contributing $4.81 to Full House stock is not included in the $7 target, says Bain. The shares haven’t traded above $4 in three years.
The name received a jolt last week from voters in Colorado. That’s where the company runs Bronco Billy’s in Cripple Creek, and voters there decided to remove the $100 per hand bet limit on table games and add new offerings, such as baccarat.
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