A well-placed f-bomb during a quarterly earnings conference call seemed to do the trick.
Regional casino operator Full House Resorts doesn’t garner big headlines. The company has five casinos, none of which are located in major metropolitan markets. Full House stock, traded on the Nasdaq, has hovered below $3 a share for much of the year. The company averages roughly 72,000 shares traded on a daily basis.
Full House CEO Dan Lee/Photo via LVRJ
CEO Dan Lee let out a bit of frustration last week over the Las Vegas-based company’s lack of support from the investment community following three sports betting deals he believes should double Full House’s stock value.
Anyone who has followed Lee’s career – he’s the former CFO of Mirage Resorts and the former CEO of Pinnacle Entertainment – knows he can be a bit exuberant at times about the casino business.
“I’m kind of surprised our stock hasn’t reacted, and I think it’s just because we’re so small nobody is really paying attention,” Lee said during the opening 15 minutes of the hour-long call with analysts where he discussed Full House’s sports betting deals for Indiana and Colorado.
“But this is really mega-f***ing important,” he added.
On Monday, Full House’s stock jumped 5.71% to close at $2.96, up 16 cents, after Macquarie Securities gaming analyst Chad Beynon upped his rating on the company’s stock from Neutral to Outperform and increased his target price to $4 per share. More than five times the average daily volume were traded.
“(The) shares were underperforming year to date, but more recently shares have bounced back following several positive announcements from the company, which we believe will bring the company incremental (cash flow) over the next several years,” Beynon told investors in a research note.
“We acknowledge that a company with only a few properties can miss quarters on something as little as a snowstorm, but we feel confident in management’s ability to lay the groundwork to grow the company,” Beynon said.
Still, much has to happen for Full House to benefit long-term from the analyst’s boost.
Cripple Creek expansion rendering/ Courtesy Full House Resorts
On Tuesday, Colorado voters are expected to approve Proposition DD, which would legalize sports betting, allowing casinos to open sportsbooks and offer the activity online. Colorado University-Boulder’s American Political Research Lab said Sunday the measure had support of 62% of voters.
If the proposition passes as expected, Full House will not only add a sportsbook to Bronco Billy’s Casino in Cripple Creek, but will offer three sports betting “skins” – a term used to describe online casinos – to its partners: Wynn Resorts, Churchill Downs and United Kingdom-based Smarkets. The same three companies will have Full House skins associated with the Rising Star Casino in Indiana, where sportsbooks have launched and mobile sports betting is about to go live.
Lee has been around long enough to understand that mobile sports wagering is the market driver. One just has to look toward New Jersey, where mobile betting apps account for roughly 80 percent of the state’s total monthly sports handle.
“It’s opening a whole new industry,” Lee said. “And at least the data so far, where this has happened, shows it doesn’t have any impact on the casino gaming itself. If anything, it might be a slight positive.”
Full House assumes none of the sports wagering risk associated with the skins, but the three agreements will pay the company “a minimum” of $7 million annually through a 10-year lifespan – $70 million.
For a property like Rising Star – “the smallest casino in the state in terms of revenues,” Lee said – the casino gets boost from sports betting through the fees associated with the online sites.
For Bronco Billy’s, sports betting revenues provide Full House with the funds needed to complete a second phase of expansion at the casino without having to issue additional equity.
“I think that has been an overhang on the stock,” Lee said. “People worried about how are you going to finance the hotel in Cripple Creek, and now we have an answer.”
Lee led a group of activist Full House investors in 2014 who struck a deal that ousted the former management and several board members in hopes of changing the company’s direction.
In addition to Rising Star and Bronco Billy’s, which the company acquired in 2016 for $30 million, Full House operates Stockman’s Casino in Fallon, Nevada, manages the Hyatt Casino in Incline Village, Nevada, under a lease agreement, and owns the Silver Slipper Casino in Bay St. Louis, Mississippi.
The Silver Slipper’s sportsbook opened last year when Mississippi legalized sports betting and the facility is managed by William Hill US. However, mobile sports betting in the Gulf Coast state is limited to just the property’s grounds, making it effectively insignificant to any revenue calculations.
Lee is happy with what the company has in Indiana and Colorado.
“I wish I could find six new sports agreements to sign in the fourth quarter, but we’re out of sports agreements opportunities,” Lee said. “But we’ll keep looking and keep running the company as best we can, and hopefully, our stock price will reflect that overtime.”
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
