Full House Stock gets major raise on Waukegan approval

Posted on: Dec 11, 2021, 1:50 a.m.

Last update on: December 11, 2021, 01:50 a.m.

Shares of Full House Resorts (NASDAQ: FLL) saw a significant increase this week after the Illinois Gaming Board (IGB) selected the operator as the winning bidder for an integrated resort project in Waukegan.

Full stock
A rendering of the planned Full House casino in Waukegan, Illinois. The project is seen as a major catalyst for the stock. (Picture: Las Vegas Review)

On December 8, the day the IGB was announced, Full House shares jumped more than 18% on volume that was more than eight times the daily average. As the stock succumbed to some profit taking on Friday, closing five percent lower on below-par revenue, it ended the week up 27.13 percent.

Full House still has a hurdle to overcome in Illinois. He was approved for a preliminary gaming license, but IGB still needs to sign a permanent license. Still, the Waukegan news is a clear victory for Full House stock, a name Wall Street is largely bullish on and which rewards investors, as highlighted by a 176.59% gain since the start of the year.

Waukegan equipment for the complete stock

Analysts have long been excited about the potential impact an Illinois resort could have on Full House shares.

In late November, Roth Capital analyst Edward Engel launched a Full House hedge with a “buy” rating and a price target of $ 16 (now $ 18), noting that $ 3.50 of that forecast is. attributable to Waukegan. Even with the stock rallying this week, that $ 16 price target implies a 47.1% rise from Friday’s close. The consensus price target on Full House is $ 14.67.

In a note to clients this week, Engel said Full House’s Waukegan site is capable of generating earnings before interest, taxes, depreciation and amortization (EBITDA) and gross gaming revenue (GGR) comparable to the Grand Vic – a casino 40 miles from Chicago. He adds that EBITDA of $ 50 million to $ 60 million implies an ROI of around 15% on the $ 350 million to $ 400 million Full House is expected to allocate to the Illinois project.

“Illinois regulators are allowing Full House to operate a temporary casino, which we believe lowers funding costs and improves IRRs,” Engel said. “Management believes it can build a temporary casino as quickly as seven months, where the structure is large enough to operate around 1,000 slots and around 30 tables.”

The analyst notes that a temporary casino will cost between $ 50 and $ 100 million to build.

More benefits are possible

Full House is easily one of the best performing gaming stocks since the start of the year and beats the small cap benchmarks, but that doesn’t mean there isn’t more potential. Engel believes the stock can continue to appreciate.

Prior to Waukegan’s announcement, “we factored in about a 60% chance of being selected. Over the next few months, we expect FLL shares to continue rising as investors buy ahead of Chaminox’s expansion (1Q23 opening) and Waukegan’s value becomes more tangible. “

Chamonix is ​​the operator’s project in Cripple Creek, Colorado, which is expected to be a more lavish addition to Bronco Billy’s ownership in the same town.

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