I just got off the phone with the President of Colonial Downs.
Here is a synopsis of what he told me:
1. Last QTR's earnings were not on a fully diluted basis. This means they earned .06/share vrsus a loss of .02, not the .12 reported. The .12 was with only 3 million shares outstanding, not the 7.2 million shares after the IPO.
2. There are three analysts covering the stock - Davenport Securities, Scott, and FBR (the underwriter). The consensus estimate for the company is .37 this fiscal year. The .06 is counted as .06 in this estimate. That means the rest of the FY will see increasing earnings every quarter. 37-6 = 31 cents for the rest of the year. Next year's earnings are estimated at .92 cents.
3. The relationship with Pepsico is as follows: Pepsico pays them $100,000 each year for product placement and advertising at the track. This money will be paid sometime this year, and was not reflected in the first quarter's earnings. It amounts to 1.4 cents in earnings. No big deal, in my opinion.
4. Colonial Downs will open two additional off-track betting centers this FY. Brunswick, VA will open the end of August and the Hampton, VA center will open the end of September. Hampton is going to be a very upscale, flagship operation. Note that these centers are a 90% margin operation, versus the track, which is only 10% margin. The money is to be made in the off-track centers.
5. Many other off-track centers are planned, but require approval from the state of Virginia. Ultimately, the company hopes to open 200 of these in Virginia. Many municipalities are looking seriously at petitioning the state to open one, since they would like to get the revenue.
6. Concerts and other events will generate income when no racing is going on at the track. The company is interested in being the premier turf track facility in the country.
Overall, the conversation was very upbeat. In my opinion, the stock is too cheap and will go up once it gets more visibility. |
