Dover Downs Gaming and Entertainment, Inc. (DDE, HOLD)
Expectation: We anticipate 2Q06 revenue to come in below consensus and our estimates as gaming revenue for the quarter as reported by the Delaware Lottery has been less than expected.
For the quarter, we are looking for total revenue of $60.5 million (+10.6% y/y), EBITDA of $13.4 million (+13.6% y/y), and EPS of $0.20 vs. $0.16 last year.
Assumptions: Our estimates assume $56.7 million in gaming revenue with a slot win per day of $240 and roughly $1.0 million in pari-mutuel commissions combined with $3.8 million in non-gaming revenue.
Based on DE Lottery data, VLT gaming revenue was roughly $5.1 million less than what we were looking for in the quarter.
Assuming expenses are in line with our estimates, we believe EPS could be $0.01 to $0.02 below our estimate of $0.20. n Outlook: Shares of DDE recently increased approximately 100% in the first half of CY06 pulled and pulled back roughly 20% from its high of $20.60.
However, we do not view this as a good buying opportunity as we believe shares are fairly valued taking into account the company's planned hotel expansion and expected casino expansion (add 500 to 1,500 slots), and we believe 2Q06 results could come in below consensus and our estimates.
Valuation: Our PT is based on an EV/EBITDA multiple of 8.1x our estimated post hotel and casino expansion EBITDA estimate of $74.5 million and translates into 10.2x and 9.5x our '06 and '07 EBITDA estimates.