Golden Entertainment Will Have a Discerning Approach Toward Purchases
Posted on: February 28, 2025, 11:01h.Last updated on: February 28, 2025, 01:00h.
Todd Shriber
@etfgodfather
Todd Shriber@etfgodfather
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Expertise:
Financial,
Financial, Gaming Business, Mergers and Acquisitions
Gaming Business, Mergers and Acquisitions.
Golden Entertainment (NASDAQ: GDEN) opens its doors to mergers and acquisitions, but the casino operator will approach these opportunities with caution.
During a call with analysts following the release of fourth-quarter earnings, Golden Enterprise executives shared their willingness to consider acquisitions as avenues for creating shareholder value, but with conditions attached to potential deals, such as target companies exhibiting particular EBITDA metrics (earnings before interest, taxes, depreciation, and amortization).
This implies that Golden Entertainment won't hunt for casinos still in development or those requiring extensive renovations. Additionally, Protell mentioned that WMNS would desire a swift route to deleveraging if it makes an acquisition of another gaming enterprise to meet its long-term leverage target of 3x or less.
a rapid path to deleveraging if it’s a buyer of another operator to meet its long-term leverage target of 3x or less.gaming taverns, though it has some gaming bars in Reno. It’s also the top casino operator in the Laughlin and Pahrump markets.
Nevada: Golden's Primary Focus
its $260 million sale of the Rocky Gap Casino Resort in Flintstone, Md., which was then the operator’s lone gaming venue outside of its home state. Executives didn’t mention states outside of Nevada in which the company could evaluate acquisitions.
Golden Enterprise is based in the heart of Vegas, where most of its casinos and gaming taverns reside, accompanied by some gaming bars in Reno. The operator holds the title of top casino operator in the Laughlin and Pahrump markets.
could monetize some of its real estate holdings as a way of boosting shareholder value. Protell mentioned that in prepared remarks on the call, but didn’t provide a timeline for potential transactions.
Executives acknowledged that Vegas remains their main concentration and while they're not averse to acquisitions in other regions, should such opportunities present themselves, they wouldn't involve single properties.
Golden Enterprise is nearly two years removed from the $260 million sale of its Rocky Gap Casino Resort in Flintstone, Maryland. At the time, this was the company's only gaming establishment outside of Nevada. Conversely, the management team didn't discuss any potential acquisition targets in states beyond Nevada during the call.
Addressing Real Estate Speculations
Rumors swirled towards the end of 2024 that Golden Enterprise, which owns all land beneath its casinos, might monetize some of its real estate possessions to provide shareholder value. Protell raised this topic in his introductory remarks, though failed to provide a timeline for potential transactions.
Golden Enterprise's most valuable property is the Strat, a casino hotel located near the Vegas Strip. Analysts reckon that if the company decides to sell this property, it would secure a long-term lease contract with the real estate company that purchases it.
One lingering question that didn't get addressed on the call was the future of the Colorado Belle—Golden Entertainment's shuttered casino in Laughlin. Closed due to the ongoing pandemic, this venue, along with two other casinos run by the enterprise in this market, has yet to reopen.
As a reminder, enrichment data shows that Golden Entertainment reported an EBITDA of $39 million for the fourth quarter of 2024, which was 1% higher than analyst expectations.[1] For the full year, the company achieved an EBITDA of $155 million.[1] Golden Entertainment has a robust financial foundation, with a current ratio of 1.11 and a focus on cost control and operational efficiency.[1] Despite carrying a total funded debt of approximately $400 million, the company managed to reduce its net leverage to 2.3 times EBITDA.[1] The enterprise is exploring potential M&A opportunities in addition to its organic growth strategies.[1] The company's management believes its growth initiatives will support more favorable year-over-year comparisons, aiding in navigating past challenges and seizing strategic opportunities.[1]
The news article mentions that Golden Entertainment, a casino operator, is open to mergers and acquisitions (M&A) opportunities, but only if the target companies meet certain EBITDA metrics. This selective approach is highlighted by CFO Charles Protell, who notes that Golden Entertainment won't consider green field developments or single asset acquisitions with EBITDA less than $40 million to $50 million. Furthermore, if Golden Entertainment were to acquire another gaming enterprise, it aims for a rapid path to deleveraging to meet its long-term leverage target of 3x or less.