Golden could consider sale-leaseback at Unidentified Casino

Posted on: October 18, 2024, 4:21 am.

Last updated on: October 18, 2024, 4:21 am.

Golden Entertainment (NASDAQ: GDEN) may consider selling and leasing back one of its casinos to raise cash.

Carlo Santarelli, an analyst at Deutsche Bank, laid out this theory in a new report to clients, noting that the likelihood of Golden placing one of its casinos on a sale-leaseback agreement is “increasing.” The analyst did not speculate on which venue Golden might consider selling. Currently, the Las Vegas-based gaming company owns all of the real estate on which its eight casino hotels are located. Three of these venues are in Las Vegas, another trio is in Pahrump, Nevada, and two more are in Laughlin.

Santarelli did not speculate on the timeline for such a deal to occur, nor did he hypothesize about which company might be Golden’s real estate partner in a sale-leaseback deal. The operator reports third quarter results on November 7th and it is possible that the rumor will be dispelled at that time.

Selling a casino could increase golden shares

Amid investor concerns that persistent inflation and high interest rates are weighing on the lower end of Golden’s casino customer base and tavern business, the stock has struggled badly this year, losing nearly 23% while the Russell 2000 Index fell 12, increased by 43%.

Recently, analysts’ earnings and revenue revisions have been largely bearish for Golden, adding pressure to the stock and potentially fueling speculation about a deal that could renew the bull market.

“We believe our updated guidance reflects what we believe to be relatively stable trends in key segments, adjusted for seasonality, which include a moderation in same-store sales declines early in the fourth quarter,” Santarelli noted. “That said, we recognize that the Golden story has been a predominantly negative estimate revision recently, which we believe has likely led to more speculation about strategic moves.”

The analyst lowered his earnings forecast for Golden but reiterated his “buy” rating on the stock. He added that the shares’ low valuation could increase the likelihood that the operator will pursue a transaction that creates value for investors.

How a casino sale could affect Golden

Without knowing what property Golden would sell, what the tax rates are and what the tax implications are, it’s difficult to model the financial impact for the operator, but Santarelli tried. He said that in a sale-leaseback through the end of next year, Golden would assume $87 million in annual lease costs and have $130 million in cash, including proceeds from the deal.

One can argue that at $87 million in rent, it assumes either The Strat is the venue Golden will sell, or the operator could enter into sale-leasebacks on multiple properties.

Golden could also be thinking about finally making a decision about the Colorado Belle in Laughlin, which has been closed since 2020. There are many rumors about the fate of this property, but the operator has made no public announcements about its plans for it.