Twin River Offers Investors ‘Compelling’ Long-Term Value Possibilities, Says Analyst

Posted on: March 4, 2020, 09:50h. 

Last updated on: March 4, 2020, 10:37h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Twin River Worldwide Holdings, Inc. (NYSE:TRWH) delivered fourth-quarter and full-year 2019 financial numbers on Tuesday. While there wasn’t much in the way of surprises, one analyst remains enthusiastic about the regional gaming company.

Dover Downs operator Twin River is a compelling long-term gaming bet, according to one analyst. (Image: Delaware Online)

The operator of Rhode Island’s two casinos last month forecast 2020 earnings before interest, taxes, depreciation and amortization (EBITDA) of $180 million, or $190 million on a run rate basis, a forecast that was reiterated yesterday.

Stifel analyst Brad Boyer sees an underappreciated value proposition with TRWH stock.

We continue to like the setup in TRWH shares at current levels, as we believe the current sub-8x 21E EBITDA multiple conveys a dramatic underappreciation for 1.) the company’s ability to source and execute accretive M&A transactions, 2.) management’s propensity to augment shareholder returns through direct returns of capital, 3.) the company’s ownership of its real estate assets and a significant land bank, 4.) the resiliency of RI cash flows, and 5.) potential upside from the RI VLT JV,” said the analyst in a note provided to Casino.org.

“RI VLT JV” refers to a Rhode Island video lottery terminal joint venture between TRWN and International Game Technology (IGT) announced in January, one that will help the companies establish dominant positioning for gaming machines in the Ocean State.

Buy The Dip?

As has been the case with other gaming stocks, TRWH has been drubbed by coronavirus fears. The name entered Wednesday with a drop of almost 7.10 percent over the past week and, at this writing, the shares are lower by about 4.70 percent following Tuesday’s earnings update.

“As with all of the names under our coverage, we find it most prudent to factor the potential coronavirus impact into our current thinking on the shares,” said Boyer. “That said, we are encouraged by the shares’ relative outperformance in the face of the coronavirus adversity, an outcome we attribute to a discounted valuation prior to the outbreak.”

Twin River has no international exposure. In addition to its two Rhode Island venues, the company operates Dover Downs in Delaware, a pair of Mississippi properties, the Isle of Capri Casino in Kansas City, Mo., and several small casinos and a racetrack in Colorado.

Long-Term Opportunity

With TRWH stock languishing against the coronavirus backdrop, investors may want to take a long-term view of the operator, something Boyer advises.

“We actually believe TRWH presents a compelling investment case for long-term investors at current levels, as the asset’s uncorrelated characteristics should allow it to hold up better than the peer group and market at large in the near term, to the extent the coronavirus impact intensifies,” said the analyst.

Boyer has a “buy” rating and a $36 price target on TRWH, which implies upside of 46 percent from where the stock resides at this writing.