Eldorado Resorts issued what amounted to a non-denial denial on Thursday concerning the Reno-based casino company’s interest in growing its gaming footprint.
But Thomas Reeg, in his first conference call as chief executive officer, said the company doesn’t comment on rumors. Eldorado has been linked as a potential buyer of Caesars Entertainment, whose board formed a transaction committee to evaluate a potential sale or merger with another casino operator.
“We read the same newspapers as you and hear the same rumors,” Reeg said in prepared remarks on Eldorado’s first quarter conference call. “We don’t comment on any particular transaction. But if there are targets that you might think would be a good fit, then you would be safe to assume we would be taking a hard look.”
Eldorado operates 26 casinos in 12 states and has been one of the most active gaming companies in the acquisition market over the last two years. In 2017, Eldorado acquired Isle of Capri Resorts for $1.7 billion. Last year, Eldorado bought seven casinos from Tropicana Entertainment for $1.85 billion in a joint venture with real estate investment trust Gaming and Leisure Properties, and added the Grand Victoria Casino in Elgin, Ill., for $327.5 million.
The company is now the third largest regional based casino operator in the country.
Reeg, Eldorado’s former chief financial officer who took over as CEO in January from Gary Carano, did say in response to an analyst question that Eldorado views REITs “as a financing tool” and that the company would not want to be just the operator.
“We look at what we can do with a portfolio of assets that is different from current ownership,” Reeg said. “We are constantly looking.”
Reeg, following a Nevada regulatory meeting last fall, said the company was interested in owning a resort on the Las Vegas Strip, but didn’t provide specifics. Eldorado owns three casinos in Reno and acquired the MontBleu at Lake Tahoe and the Tropicana Laughlin through the Tropicana Entertainment deal.
“The Strip and Atlantic City are both destination markets,” Reeg said. “We’ve operated in Reno longer than anyone as if it were a destination market.” He said the company three resorts – Eldorado, Circus Circus and the Silver Legacy – “are adjacent to (Interstate 80) and in downtown.”
As for Tropicana Atlantic City, Reeg said “we are competing with the same companies that have casinos in Las Vegas.” He said Eldorado had delivered a property “that has grown (cash flow) since the market expanded.”
Gaming analysts believe Eldorado will continue to explore acquisitions.
“Eldorado is the best roll-up regional gaming story and management continues to paint a positive outlook on further growth,” Macquarie Securities gaming analyst Chad Beynon told investors. “In addition, we still believe Eldorado could make further acquisitions and Eldorado (stock) historically trades well post any deal regardless of the size.”
In the quarter, Eldorado said total revenues were $635.8 million, a record for the company for a single quarter. However, when the casinos acquired from Tropicana Entertainment and the Grand Victoria were factored into the 2018 first quarter numbers, revenue was off 3.2 percent.
Eldorado’s net income in the quarter grew 83.3 percent to $38.2 million. Earnings per share were 49 cents. Cash flow rose 6.4 percent to $166.7 million.
Of the company’s five regions, only the East Region, which includes two racetrack casinos and the Tropicana Atlantic City, grew revenues in the quarter. On the earnings call, Eldorado said it has already realized $50 million of the expected $55 million in cost saving from the Tropicana deal.
Shares of Eldorado closed at $48.34 on the Nasdaq Thursday, up 51 cents or 1.07 percent. The stock price was up roughly 1 percent in after-hours trading.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
