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Category: Stock Market and Twin River Worldwide
Date: 30 September 2019 Stock Price: $22.07 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of Twin River Worldwide, the owner of operator of 4 casino's across various states in the United States.
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About Twin River Worldwide
Twin River Worldwide Holdings, Inc. owns and manages four casinos, two casinos in Rhode Island, one in Mississippi, and one in Delaware, as well as a Colorado horse race track that has 13 authorized OTB licenses. Properties include Twin River Casino Hotel (Lincoln, RI), Tiverton Casino Hotel (Tiverton, RI), Hard Rock Hotel & Casino (Biloxi, MS), Dover Downs Hotel & Casino (Dover, DE) and Arapahoe Park racetrack (Aurora, CO). Its casinos range in size from 1,000 slots and 32 table games facilities to properties with over 4,100 slots, approximately 125 table games, and 48 stadium gaming positions, along with hotel and resort amenities. Its shares are traded on the New York Stock Exchange under the ticker symbol “TRWH.”
Overview of Twin River's latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $143.218 million (up from $110.815 million from the same quarter of the previous year)
- Revenue increased by 29.24% over the last 12 months
- Operating costs: $109.372 million (up from $79.391 million for the same quarter of the previous year)
- Cost of revenue increased by 37.7% over the last 12 months
- Net income $17.180 million (down from $18.995 million for the same quarter of the previous year)
- Diluted earnings per share: $0.42 (down from $047 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 41.261 million (up from 38.541 million for the same quarter of the previous year)
- Cash and cash equivalents: $383.431 million
- Cash and cash equivalents per share: $9.29
- Cash and cash equivalents makes up 42% of Twin River's market capital
- Cash and cash equivalents makes up 31.86% of Twin River's total assets
- Accounts receivable: $27.874 million
- Accounts receivable makes up % of Twin River's total assets
- Stockholders equity of Twin River: $417.443 million
- Stockholders equity per share: $10.11
- Twin River is trading at 2.1 times its stockholders equity which is within the expected range of between 2 and 4 which most companies tend to trade at.
- Cash generated from operations (for the 6 months): $56.666 million
- Cash generated from operations per share (for the 6 months): $1.37
Twin River Worldwide' management commentary on the results and earnings guidance
Providence, Rhode Island - August 12, 2019 - Twin River Worldwide Holdings, Inc. (NYSE: TRWH) (the “Company”, “Twin River” or “TRWH”) today reported financial results for the second quarter ended June 30, 2019.
“We are pleased with the Company’s results in the quarter as the financial performance at Dover exceeded our already high expectations and our Rhode Island operations performed well despite some softness in the New England gaming markets in the second quarter,” said George Papanier, President and Chief Executive Officer. “Our emphasis of focusing on in-market and out-of-market accretive growth is also proving itself in the early going as we continue to grow prudently into a multi-state operator based in Rhode Island versus a single regional operator.”
Our Rhode Island segment has been impacted by new competition which opened in Boston in late June. In commenting on this impact, George Papanier said, “The new competition had a greater than expected negative impact on our table games at Lincoln in July 2019, while our slots performance for the same period was in line with expectations given the seasonal weakness that we noted earlier that impacted the second quarter. Table games revenues decreased by approximately $3.9 million(1), or 34%, to $7.6 million when compared to July 2018, while our slots NTI decreased approximately $6.4 million, or 17%, to $32.2 million(1) compared to July 2018. We are pleased with the lack of impact we have experienced at Tiverton where gaming volumes in July were relatively flat to our recent monthly run-rate which we view as a positive. When we conceived and planned the Tiverton property, the expectation was for it to offset the impact of new competition so that operating income in the market would be flat to Lincoln alone. We are revising our expectations for combined operating income to be lower by approximately 10% from those expectation levels.”
On June 14, 2019, the Company declared a cash dividend of $0.10 per common share (“Dividend”) that was paid on July 23, 2019 resulting in a $4.1 million return to shareholders. On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”) and repurchased approximately 2.5 million shares of its common stock for cash at a price of $29.50 per share for an aggregate purchase price of $75 million. Both the Dividend and Offer were components of the Company’s previously announced capital return program and were funded with cash on hand. After the effect of the payment of the Dividend and consummation of the Offer, the Company had approximately $171 million available for use under its capital return program.
“We are pleased with the Company’s results in the quarter as the financial performance at Dover exceeded our already high expectations and our Rhode Island operations performed well despite some softness in the New England gaming markets in the second quarter,” said George Papanier, President and Chief Executive Officer. “Our emphasis of focusing on in-market and out-of-market accretive growth is also proving itself in the early going as we continue to grow prudently into a multi-state operator based in Rhode Island versus a single regional operator.”
Our Rhode Island segment has been impacted by new competition which opened in Boston in late June. In commenting on this impact, George Papanier said, “The new competition had a greater than expected negative impact on our table games at Lincoln in July 2019, while our slots performance for the same period was in line with expectations given the seasonal weakness that we noted earlier that impacted the second quarter. Table games revenues decreased by approximately $3.9 million(1), or 34%, to $7.6 million when compared to July 2018, while our slots NTI decreased approximately $6.4 million, or 17%, to $32.2 million(1) compared to July 2018. We are pleased with the lack of impact we have experienced at Tiverton where gaming volumes in July were relatively flat to our recent monthly run-rate which we view as a positive. When we conceived and planned the Tiverton property, the expectation was for it to offset the impact of new competition so that operating income in the market would be flat to Lincoln alone. We are revising our expectations for combined operating income to be lower by approximately 10% from those expectation levels.”
On June 14, 2019, the Company declared a cash dividend of $0.10 per common share (“Dividend”) that was paid on July 23, 2019 resulting in a $4.1 million return to shareholders. On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”) and repurchased approximately 2.5 million shares of its common stock for cash at a price of $29.50 per share for an aggregate purchase price of $75 million. Both the Dividend and Offer were components of the Company’s previously announced capital return program and were funded with cash on hand. After the effect of the payment of the Dividend and consummation of the Offer, the Company had approximately $171 million available for use under its capital return program.
Twin River Worldwide (NYSE: TRWH) stock price history
kThe image below, obtained from Google, shows the stock price history of Twin River (NYSE: TRWH) since its listing. And sadly for Twin River investors its not been a great time for the group since they listed. At their time of listing in March 2019 they were trading around $30 a stock, and they are currently trading at $22.07. This is a negative return of -26.4% in 7 months this their listing. And the bad news for Twin River investors is the fact that the company is trading at a lot closer to its 52 week low of $20.35 than it is to its 52 week high of $33.98 which to us is a clear sign that the short term sentiment and momentum of Twin River stock is still overwhelmingly negative.
Twin River Worldwide (NYSE: TRWH) latest stock valuation
So based on the earnings report of Twin River (NYSE: TRWH) what do we value Twin River (TRWH) stock at? Based on the earnings report and the increased competition they mentioned that is affecting one of their casino's our valuation models sets a target (full value) price on Twin River of $24.30. We therefore believe Twin River is undervalued. Our valuation models were adjusted to take into account the effect of increased competition and we reduced expected future earnings from the group by 10% in our valuation model to compensate for the additional competition.
We suggest looking to buy Twin River at least 10% below our target (full value) price of $24.30. A good entry point into Twin River stock would therefore be around $21.87 a Twin River stock. It is currently trading at very close to our suggested entry point into the group.
We suggest looking to buy Twin River at least 10% below our target (full value) price of $24.30. A good entry point into Twin River stock would therefore be around $21.87 a Twin River stock. It is currently trading at very close to our suggested entry point into the group.