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Caesars Entertainment Corporation Message Board

  • jtyler2030 jtyler2030 Sep 3, 2012 12:16 PM Flag

    John Paulson's Math on Caesers Entertainment

    Caesars (CZR): Stock with high option value. Was LBO. Common is only 7% of valuation, $1.7B, Opco Debt $16.9B, Net PropCo debt $4.8B. $23B total cap. So equity gets the upside. LBO guys put $6B in, now equity only $1.7B. Says they are turning around.

    Stock owners have not only gaming properties, but Social gaming company worth $6-9, Online gaming could be $24 per share. Key is growth. Are seeing RevPAR growth. Added Octavius Tower. Adding Cleveland. 2013 LINQ in Vegas, Cincinnati.

    Online gaming upside option. No debt due until 2015. Three years runway. 2007 they did $2.8B EBITDA, LBO at 11x. Guess they get back, adjusted to new facilities, $3.2B Likes hotels because the rates increase with inflation. Online gaming may be another $300M, so total to peak, get to $3.5, with 11x multiple stock is $138, a 10x upside.

    My little throw in: Caesar entertainment is a CYCLICAL stock. As comical as that sounds for me to even have to mention everyone seems to have forgotten this. Caesers will not do well until we have a ROBUST RECOVERY, which we have yet to see. In a highly levered situation, with a massive amount of this company focused on regional play, CZR is even more cyclical than most would even tend to think when glancing at the company on the surface.

    The head of Moody's said this week that after the fiscal cliff and the election, this time next year people will be talking about how strong the U.S. economy will be growing. He thinks 4% is certainly possible. I say why not? The U.S. economy won't stay down for ever. We have 250 years of evidence to support this theory.

    Assets will be over $17 billion in a robust economy... 125 million shares outstanding and a stock price of $136 a share puts the market cap at a valuation of 17,040,000,000.00. With our market cap under 900 million now, this presents a tremendous opportunity in a robust recovery.

    Sentiment: Strong Buy

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