A sleeper for all who are interested in investing in gaming stocks. Riviera Holding Company. Currently no analysts cover this stock.
Some things I like about this company.
1. Less then 4 million shares of stock, and 90% of it is closely held. The whole company is for sale at the right price.
2. Coming out of a period during which it carried a lot of unproductive debt while it built a new casino in Black Hawk Colorado and expanded its convention facilities in Las Vegas. They now have a 160,000 sq foot (picture 3 football fields) covered convention center in Las Vegas at the 2,100 room Riviera Hotel and; the Black Hawk casino just opened in early Feb. I visited the BH casino twice since it opened(I live in Denver) and it is jammed. However, since the first quarter revenues have not yet been reported, the success of the BH casino is not very public yet. Based on the revenues of neighboring casinos (Isle of Capri and Central Station), the NEW Riviera BH will probably produce revenues of $70 million with an EBITDA of 25+% because it is a very low cost operation to run - 1100 slots and only 11 gaming tables, 2 small restaurants and no hotel rooms.
3. There has been very strong consistent insider buying of the Riviera stock for the past year. Just this week, two schedule 13-ds were filed with the SEC.
4. My estimate, based on historical revenues and projections for the new Riviera Casino in BH Colorado are that EPS should be $1.00 + this year and $2.50 next year. Recall that there are only 4 million shares. Total revenues after promotional expenses will be about $220 - $230 million. To earn $2.50/share would only require an after tax profit of 4.3%. My estimates agree with other posters who follow this stock and have recently posted on the Yahoo Riviera Message site.
5. The current stock price is about $6.75/share. That is only about 6 times my estimates for Y2000 EPS and an amazingly cheap 2.7 times Y2,001 EPS estimates.
The risk is that the debt is about $175 million at a relatively high interest rate of about 12% on average. Interest charges will run about $24 million a year.
I have visited the Riviera property in Las Vegas and, even though it is old, it is in terrific shape. And, I met with the CFO and I am convinced that EBITDA will easily cover the $24 million interest expense. In fact, I think that EBITDA will be about $52 million in 2,0001. If someone wanted to buy the whole company, with only 4 million shares of record, at $20/share, they could own RIV for $80 million. And, the BOD agreed to sell the entire company to a guy named Paulson in 1998 for $15/share. He backed out when the Asian crises hit. The point is, the company is for sale.
Just so you know where I am coming from, I own 12,000 shares of this stock. After I saw the success of the Riviera BH, I added 10,000 shares to my position.
Don't take my word for any of this. Check it out yourself. I think this could be a $20 stock within 2 years.
Regards,
UM |
