Caesars Asset Sale Could Happen in Months, Stock ‘Woefully Undervalued,’ Says Analyst

Caesars Entertainment (NASDAQ:CZR) delivered estimate-beating second-quarter revenue and earnings before interest, taxes, depreciation, amortization, and restructuring or split costs (EBITDAR) later(a) Tuesday. Although at that place wasn’t a specific update on the long-awaited sales agreement of 1 of its Las Vegas Strip assets, the company’s shares are considered dramatically undervalued by some analysts.

The divestment of i of its Strip properties is seen as indispensable to its debt-reduction efforts, and was widely expected to be proclaimed earlier this year. But that hasn’t occurred as of yet. On a conference call with analysts, Caesars CEO Uncle Tom Reeg said thither could be an update by the stop of the summer.

So just to live clear, we’ve talked virtually this on other calls. It’s really elucidate the clip business line that is laid out inward the VICI documents that rule this,” he said inwards response to a call into question from Stifel analyst Steven Wieczynski. “So we launched betimes this year, the deadline is past the final stage of the summer. And every deadline I’ve ever so seen in business deal land, the piece of work goes into that deadline. For us — and there’s — in that respect are plenteousness of interested parties.”

In the to a higher place comment, Reeg is referencing an accord struck with VICI Properties Inc. (NYSE:VICI) inward 2019 when Eldorado Resorts announced its $17.3 one thousand million takeover of “old Caesars.” Under that accord, VICI rights of firstly refusal for sales or sale-leaseback deals on two Las Vegas Strip properties.

The world-class Sin City deal would follow for 1 of the followers gaming venues: Flamingo Las Vegas, Bally’s Las Vegas, capital of France Las Vegas, and Planet Hollywood Resort & Casino. The endorsement would include the remainders from that radical and the LINQ Hotel & Casino.

At the terminal of the 2nd quarter, the cassino manipulator was 14.2 one million million in debt, compared to $997 gazillion inward immediate payment on hand.

Caesars Has Good Reasons to Slow Strip Asset Sale

While Caesars sports I of the gaming industry’s heftiest debt burdens, some analysts indicate the operator is redress to take a pragmatical coming to merchandising 1 of its Las Vegas venues.

“While we believe it would live good to apportion valuation to quicken debt paydown anchored past a Strip Asset sale, we trust CZR’s Strip asset TTM Earnings Before Interest Taxes Depreciation and Amortization is higher than it had been, and we perform not see to it CZRs selling a ~$215M to $220M EBITDA Strip plus for under $2.5B,” wrote b James Whitcomb Riley analyst David Bain inward a remark to clients. “We believe CZRs remains inward modern negotiations with a strategical buyer, and piece the final (likely near-term) outcome is unknown, in that location is certainly no more demand for a sales event to occur for shares to persist in to marching upward, inward our view.”

He points come out that Caesars has slashed debt past most $2 1000000000 inwards simply 18 months and that the gunstock is “woefully undervalued.” He has a “buy” rating on the Harrah’s operator with a $102 price target, implying the shares can buoy to a greater extent than stunt man from the Aug. 2 close.

In gain to fighting(a) debt-trimming efforts, Caesars is shaving losses inwards its digital business, which includes Caesars Sportsbook. As Bain notes, that building block was nearly profitable inward July, and its second-quarter deprivation of $69 1000000 was 50% better than Wall Street forecast.

Caesars Cash Flow Outlook Strong

Integral to debt reducing efforts is a company’s ability to generate loose cash flow rate (FCF) and consensus is edifice Caesars has that.

“What we trust is to the highest degree important is the fact CZR’s assets continue to green groceries strong results regular inwards the current murky macro backdrop. Leverage testament go on to live the number 1 overhang on this story. But we believe CZR can buoy stock-still green groceries ~$1B inward FCF still inward a recessive environment,” notes Stifel’s Wieczynski.

He rates the carry a “buy” with a $63 cost target.

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