Gaming investors will be watching closely as Station Casinos controlling shareholders the Fertitta family consider ways to unlock value following bankrupcy re-orginizations a few years ago. The company is reportedly on solid financial footing since the time bondholders converted to equity in 2009. Stations owns a mix of casinos in Las Vegas catering to the suburban local that include integrated resorts such as Red Rock Resort and also tavern style locations such as Barley’s Brewery and the chain of Wildfire Casinos.
Investors should compare Station Casinos to its nearest competitor Boyd Gaming. Boyd’s shares are currently trading at multi-year highs, although they are worth about 1/5th of their value about 10 years ago. Casino companies are benefiting from steady increases in consumer spending, low interest rates, and REIT conversion speculation. On the whole, consumers are spending more on descretionary expenses such as casual dining and entertainment. Core customers such as baby boomers are also the wealthiest segment of society. Low interest rates are benefiting highly indebted casinos who are able to refinance debt at increasing lower rates. These refinancings have helped boost free cashflow and provided greater scope for expansion and re-investment in current properties. The potential to convert to REITs will further increase the balance sheet strength of companies such as Stations and Boyds.
A map of Station Casinos in Las Vegas is provided below.