Famously media-shy Monarch Casino Resorts CEO John Farahi emerged to meet with Truist Securities analyst Barry Jonas in Denver, Colorado. The gist of their conversation was published in a September 22 investor note.
Jonas’s two leading takeaways were that Monarch’s Reno holdings were outperforming the market and that, while it was early in the going of Monarch Black Hawk, it “should still outpace the market as the best-in-class property.”
Management’s new focus, Jonas continued, is on mergers and acquisitions. He noted that Monarch shares are up 30 percent since January, reiterating a “Buy” rating and $120-per-share price target. Monarch stock was trading at $102.23 per share at the time of Jonas’s report.
Allowing that lower-income United States consumers had been hit by inflation, Jonas said that Monarch focuses on higher-income brackets. Also, employment rates in Reno, Black Hawk, and Denver were still strong.
Reworkings of the company’s Reno foothold were said to be driving “meaningful growth” in the Washoe County market. This manifested in 25 percent higher room rates.
Spending $100 million on renovations, Monarch tore out and fully redesigned 816 hotel rooms. Atlantis now has, Jonas opined, “the freshest room product in the hyper-competitive market.”
That said, over half of Atlantis’s business is locally derived, further driven by the F&B options and its spa. Reported Jonas, “While Atlantis should outperform the market, the Reno market overall remains healthy, seeing business and population growth from nearby Silicon Valley and California in general.”
Monarch still owns 20 acres of unused land in Reno, which it intends to develop in ways that will augment Atlantis visitation. Also, with hotel occupancy nearing 90 percent, new rooms are also under advisement.
“The land is currently used for surface parking, but any expansion would include a new parking garage,” Jonas explained. “Ultimately, a decision will be based on management’s long-term view of the market’s health.”
High per-capita income was driving Monarch Black Hawk. Jonas said it “should continue to outgrow the market as the best-in-class property, with amenities on par with Las Vegas casinos.”
Farahi and General Counsel Jason Gumer were pleasantly surprised at how quickly the casino had gotten up to speed in the Rocky Mountain market since its opening in late 2022. However, they feel that more high-end play could come their way, seeing as Denver is one of Las Vegas’s leading sources of gamblers.
Although physically somewhat constrained in Black Hawk, Monarch management believes there are ways to expand the resort. But they’re also looking at mergers or purchases to broaden their foothold.
Jonas described Farahi’s team as “hungry” for merger activity, evaluating all possibilities. Targets would have to be all-inclusive casino companies whose real estate is intact. They’d also need to enjoy strong business fundamentals, including being in growing markets.
Strongly opposed to igaming, Monarch leadership won’t consider any properties in igaming-enabled states. They are, however, amenable to those regulatory environments they consider stable.
Monarch would also be tractable to taking on properties that needed a turnaround and is looking for deals that would generate $100 million a year in cash flow. “Management also noted they are looking at non-gaming hospitality-style deals, which we think could have some synergy element with its existing casinos,” Jonas added.
The analyst cautioned that Monarch is “not looking to grow at all costs” and showing strong fiscal discipline. Should a deal not materialize by late 2027, he felt a special dividend would be on the table.
Monarch, penned Jonas, “has in the past received expressions of interest to acquire the company; and while they consider all options, they are ultimately focused on maximizing shareholder returns.” Farahi, he added, is looking at possible successors, although not for the immediate future.
