Analysts boost Penn Gaming

March 19, 2002 6:32 AM
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Despite the fact that the price of the shares has more than doubled in the past six months, analysts at Bear Stearns have reaffirmed their “buy” rating on Penn National Gaming Inc. (PENN).

In announcing the results of a recent equity research report, Jason Ader, chief gaming analyst, and his associates said, “we initiated coverage of Penn National on Feb. 20 at the previous day’s closing price of $32.62 and with a $38 asset value. With its recent acquisitions of Boomtown Biloxi, Casino Magic Bay St. Louis, and Casino Rouge, we believe Penn National has amassed a strong portfolio of regional properties anchored by its Charles Town Entertainment Complex.”

They added that they believe the company has “substantial growth opportunities” at its “racino” Charles Town Racetrack in West Virginia and that the growth would continue to drive increased EBITDA (earnings before interest, taxes, interest, taxes, depreciation and amortization), a common measure of cash flow.

Among the factors that have contributed to the additional growth were the increase in the maximum betting limit from $2 to $5 in August, 2001; the addition of a garage and other amenities at the property, and the addition of more slot machines.

“Given our long-term positive outlook for Penn National,” the analysts said, “the company’s continued earnings momentum and accelerating free cash flow, as well as the potential for significant upside from our estimates, we believe the shares warrant a “buy” rating and should trade at 6.75-times our 2003 EBITDA estimate.”

Recently, the company received approval to add 1,500 slot machines to its Charles Town facility.