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Sunday, July 17, 2011

Full House Resorts (FLL)

Full House Resorts (sec)

Stock is $3.33

First thing I want to see is the long term trends of revenues, earnings, margins. leverage.

2010 10-K
18 million shares

They basically own casinos.  Casinos tend to be associated with bad stuff.  They obviously make a lot of money.  The long term trend (50 years) has been growth in the industry.  I'm always expecting that to change, but it never does.  I'm also always expecting people to get tired of casinos and try to get them shut down, which is probably difficult to do.

Two fears: Corruption, competition from too many other casinos.
The corruption is hard to see.  The competition shows up as low margins.

Started in 1987.  1994 got involved in several projects in Battle Creek, MI (tribal), 50% owner of a Harrington, Delaware raceway and casino ("racino").  Own a casino in Fallon, NV.  And acquiring the assets of something in Rising Sun, Indiana.  Should be closed already.

They've got some projects in the works and some discontinued projects.  Got cut off by the Nambe Pueblo tribe in Santa Fe.  A project in Decker, Montana is cancelled due to economic conditions.

Balance sheet is very solid.

Revenues (million $), net margins, notes
2010: $33, 23%, mostly management fees, $5 million equity in net income of unconsolidated JV and guaranteed payments
2009: $19, 25%, yeah lots of unconsolidated JV stuff going on (could be crap)
2008: $9.7, 16%, balance sheet got cleaned up here
2007: $9.6, 9.9%, balance sheet was far worse back in 2007

Ok, so how about this year?  Q1
They're doing a major acquisition of Grand Victoria ($42 million) which nearly doubled assets and put a similar jump in LT liabilities.  Debt to equity is around 1/2, not too bad, assuming this isn't a bad acquisition.

Revenues are flat yoy.  Net income is down 20%! due to project development costs and interest expense.

No breakdown of cash flow from operating activities.
Cash flow: $20 million sunk into acquisition.  $15 million borrowed.  $2.4 million distributed to non-controlling interests in JV.

Entered into lease with a landlord to operate Grand Lodge Casino in Incline Village. Tahoe.  I think I stayed there once years ago.  5 years of conducting all gaming in the casino.  Early termination rights for both parties.  Option to extend. Wow, $125K monthly rent.

Anywayz, earned 43 cents in 2010, 26 cents in 2009.  Earned 9 cents in Q1 of this year.


I'd guess the stock should be selling for about $4 a share, which is not far from the current $3.33.  This one would be a lot more trouble than other companies, trying to figure out the unconsolidated stuff, trying to figure out if there's any shady stuff, and the possibility of "too many casinos" market saturation.

For now this goes on the "too difficult" pile.

What about Nevada Gold (UWN) for a casino play? I have been covering it for a while on my blog, and think that it is pretty promising.
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