Full House Resorts: risks and rewards in casino expansion

Lea Hogg January 23, 2024

SiGMA news

Full House Resorts: risks and rewards in casino expansion

Full House Resorts, a major operator of casinos in the United States, has been making significant strides in the industry. The company currently owns seven casinos spread across Mississippi, Indiana, Nevada, Colorado, and Illinois, and also operates online sportsbooks.

Stable revenue growth

Despite the turbulence experienced over the years, Full House Resorts’ stock has seen a compound annual growth rate (CAGR) of 14.8 percent over the past five years.

Excluding the impact of the pandemic, the company has maintained stable revenues, achieving a CAGR of 4.3% from 2012 to the present. This growth has accelerated since 2023, largely due to the company’s substantial investments in new casino openings.

Significance and impact of earnings

Full House Resorts has been heavily investing in growth, with significant capital expenditures related to new casino openings. In February 2023, the company opened The Temporary by American Place in Illinois, and the Chamonix Casino Hotel in Colorado was launched in late December 2023. These investments have led to a substantial increase in quarterly capital expenditures, peaking at $54.8 million in Q4/2022.

The opening of The Temporary by American Place has significantly boosted Full House Resorts’ earnings. By Q3, as operations at the American Place continued to ramp up, revenues from the casino reached $23.9 million, accounting for 33.4 percent of Full House Resorts’ total revenues.

Road ahead

While the earnings contribution from The Temporary is significant, the earnings profile of Chamonix is yet to be seen, making Full House Resorts an intriguing stock to watch. The company’s valuation suggests some upside in the baseline scenario. However, due to the volatility in expected earnings and Full House Resorts’ highly leveraged balance sheet, the investment case remains volatile, warranting a hold rating. As Full House Resorts continues to navigate the challenges and opportunities in the casino industry, it will be interesting to see how its strategic investments pay off in the long run.

Success of Chamonix uncertain

Full House Resorts presents a complex investment case.

The significant earnings from The Temporary are promising, yet the potential of Chamonix remains uncertain. The company’s valuation indicates potential growth, but the volatility in earnings and a highly leveraged balance sheet contribute to investment risk. Therefore, a cautious approach is advised with a hold rating. As the company continues to adapt to the evolving casino industry, the payoff from its strategic investments will be a key factor to watch in the future.

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