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Penn National Gaming Inc. Message Board

  • neverabogey neverabogey Jun 3, 2011 11:53 AM Flag

    this is Morgan Stanley letter on PENN

    just got it yesterday

    Provides Compelling Opp.
    Investment conclusion: PENN remains our preferred
    way to play the recovery in domestic gaming revenues.
    We believe there is upside to current 2011 and 2012
    consensus estimates, as same-store growth estimates
    remain achievable / beatable through 2012 and the Ohio
    leg of the company’s development pipeline opens.
    That said, we expect PENN to be a “one-step-back, twosteps-
    forward” stock, as potential legislative changes in
    Ohio could cause negative estimate revisions in the near
    term. We believe these short-term revisions should
    provide a compelling buying opportunity, as consensus
    estimates still need to come up, as consensus Ohio
    projections remain 100% too low, in our view. (We note
    that we do not expect Ohio State coach Jim Tressel’s
    resignation to affect our future Columbus projections.)
    Potential changes to Ohio gaming legislation could
    negatively impact our EBITDA forecasts by $26 mn
    ($2 / share)… Driven by the state’s desire to solve its
    budget shortfall, the governor of Ohio and the state
    legislature are considering increasing gaming taxes
    and/or license fees. We believe a slightly negative
    interpretation of the Commercial Activity Tax (CAT) is
    the most likely outcome. We estimate the imposition of
    a CAT tax would increase the effective gaming tax rate
    from 33% to 37%, which would impact our PT by $2.
    … however, we believe improving same-store
    revenue trends could offset the any potential tax
    impact. We currently project 1% same-store revenue
    declines for PENN through 2012. Given recent
    improvements in regional revenue and employment
    trends, our view skews to our Bull Case, which implies
    1% annual growth (+$23 mn of EBITDA (+$2 / share)).
    50% Total EBITDA Growth through 2013. We believe
    investors focusing solely on competitive and regulatory
    impacts miss the fact that, on a net basis, PENN can
    grow EBITDA by 50% over the next three years, the
    highest rate in our coverage universe.

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    • Penn seems to weather the storms of Nasdaq very well , (forget he V shaped recovery) looks like the right people bought in.

      Anthony Marnell commented, “The staff and management of M Resort are delighted to be joining forces with Penn National as they share our commitment to delivering exceptional guest service throughout their broad portfolio of regional gaming facilities. Penn National has brought financial stability to the facility and we look forward to welcoming Penn National customers from other markets and providing them with a first class Las Vegas experience while continuing to serve our loyal base of local customers.”

    • good part is that they don't even account for the fact that PEnn owns two tracks in Ohio that will have VLT's

    • Price Target
      Equal to Base-Case scenario
      Bull Case
      (Implies 8.5x
      EV/ EBITDA)
      New developments outperform; Brisk regional recovery
      New developments generate incremental EBITDA of $300mm by 2013
      Upfront cannibalization impact is moderate ($40mm EBITDA impact in 2013)
      Organic same-store EBITDA CAGR of 8% through 2012
      Base Case
      (Implies 8.2x
      EV/ EBITDA)
      New developments offset cannibalization; Moderate regional recovery
      New developments generate total incremental EBITDA of $260mm by 2013
      Cannibalization impact is significant ($60mm EBITDA impact in 2013)
      Organic same-store EBITDA CAGR of ~6% through 2012
      Bear Case
      (Implies 7.9x
      Project delays; Significant cannibalization; Weak regional recovery
      Returns from new developments are below expectations (EBITDA of
      Cannibalization impact is significant (~$100mm EBITDA impact in 2013)
      Organic same-store EBITDA increases 2-3% annually through 2012

13.95+0.21(+1.53%)Jun 30 4:00 PMEDT