CZR

Publicly traded companies mentioned herein: Apollo Global Management LLC (APO), Blackstone Group LP (BX), Boyd Gaming Corporation (BYD), Caesars Acquisition Co (CACQ), Caesars Entertainment Corp (CZR), Deutsche Bank AG (DB), Eldorado Resorts Inc (ERI), Gaming and Leisure Properties Inc (GLPI), Isle of Capri Casinos (ISLE), Las Vegas Sands Corp (LVS), MGM Growth Properties LLC (MGP), MGM Resorts International (MGM), Penn National Gaming Inc (PENN), Pinnacle Entertainment Inc (PNK), Simon Property Group Inc (SPG), Wynn Resorts, Limited (WYNN)

Highlights

The presenter has been invested in Caesars’ recovery through Caesars Entertainment (CZR), Caesars Acquisition Co (CACQ) and the corporate debt, but he thinks the timing is right for investors to focus on CZR. Many investors have stayed away from Caesars due to the relatively complicated situation and tense/ dramatic process of getting to this point. While the reorganization plan remains subject to obtaining gaming regulatory approvals, the completion of the merger (CZR and CACQ) and other “certain financing transactions and various other closing conditions”, he believes it will take just two-to-three months to play out. And, once all is done CZR’s liquidity should improve and the Las Vegas-weighted portfolio of casino assets should trade at a better multiple to EBITDA than the market is presently giving it credit for. His optimism is based on several factors including, but not limited to: a) the bullish setup for Las Vegas over the next 12-24 months, b) the premium commanded by Las Vegas assets in the market; and c) cost savings and a meaningful renovation/ investment opportunity. At $8.80-8.90 CZR is trading at 8.4x the presenter’s estimated 2017 EBITDA (~$1.6 billion), and based on his due diligence and model shares should trade at a blended 9.1x. This equates to a low teens ($11) base case stock value and 20-30% upside over 12 months.