Monarch Resort and Casino reported its ninth consecutive quarter of double-digit income growth and fifth quarter of double-digit EBITDA growth over the last six quarters Wednesday evening as the regional casino operator continues to ride an improving Reno economy.
Adjusted EBITDA for the fourth quarter grew 17.8 percent year-over-year to $14.6 million while net revenues jumped 8.0 percent to $55.6 million. Net income also grew by 26 percent to $6.5 million with earnings per share of $0.36 up from $0.29 in the fourth quarter of 2016.
“The expansion and diversification of the Reno economy is lifting the market’s gaming revenue and combined with our operating initiatives, resulted in another quarter of market share and revenue growth at Atlantis,” said John Farahi, co-chairman and chief executive officer of Monarch.
For the full year 2016, Monarch posted a 7 percent increase in revenue to $217 million, an 11 percent jump in EBITDA to $55.7 million and 19 percent growth in net income to $24.6 million.
Monarch’s signature properties are the Atlantis Casino Resort Spa in Reno and Monarch Casino Black Hawk – located about 40 miles west of Denver.
“We expect 2017 to grow 4% and 11% based on continued growth in Reno and Colorado, as the company has seen no slowdown in business in Colorado despite construction disruption,” said Chad Beynon, analyst with Macquarie, noting that Monarch’s performance for the quarter bested those of its regional gaming peers and that its stock price remains highly attractive.
Total gaming revenue for the fourth quarter increased 9.6 percent for the quarter, helping to offset a small decline in hotel revenue due to renovations.
This mix led other analysts toward a more cautious conclusion.
“Although MCRI delivered a headline EBITDA beat, drilling down further into the results presents an uneven picture. The quarter was primarily driven by casino segment outperformance, which we believe may have benefitted from a favorable December calendar,” wrote Steven M. Wieczynski of Stifel.
The Black Hawk property – first acquired in 2012 – also performed well despite being in the midst of major disruptions to the parking facility and the construction of a new hotel tower.
“We also are pleased with Monarch Casino Black Hawk’s 2016 operating performance, as we grow revenue, profit and market share, despite the ongoing construction at the property and increased competition in the market,” Farahi said.
“We recently opened the property’s new parking structure and safely demolished the original garage,” he continued. “We also implemented a shuttle service between the new parking structure and the casino to mitigate the impact from ongoing construction, which is being well received by guests.”
The planned completed date of the full-scale resort renovation remains the second quarter of 2019, but analysts reckon that Black Hawk is well-positioned for continued growth in the meantime.
“We think there is a lot to be gained, as BH penetration into the affluent Denver suburbs is still suboptimal,” said Beynon.
But the company’s positioning in the Reno market is viewed by many as its most attractive asset.
“With ~70-75% of EBITDA coming from Reno, MCRI remains well positioned given 2015 and 2016 gross gaming revenue market growth of 3.8% and 4.2%, respectively, making it one of the healthier markets in the US,” said Beynon.
“We continue to believe MCRI presents a unique investment opportunity within our regional gaming coverage,” wrote Wieczynski. “The company has exposure to reasonably well-protected regional markets, each of which has proven capable of delivering outsized top-line growth relative to the regional average of late.”
