– Casino operator with 43 properties + digital assets.
– Since pre-pandemic, sales grew by 20% and margins significantly improved.
– Despite these positives, PENN trades at the same EV as pre-covid.
– Core business comprises 85% of revenue and provides solid downside protection.
– On top of that, PENN’s digital assets present a call option on OSB/iCasino industry.
– Both digital assets continue to grow and are at breakeven now.
– Sustainable margin improvement has been mainly achieved through cost savings.
– Management’s compensation is heavily tied to share price appreciation over the next 3 years.
– The company has started buying back shares.
– Land-based businesses are expected to deliver ~$5/share of levered FCF by ’25.
– At today’s 11x multiple, that’s $55/share value.
– Digital assets are worth an additional $30/share
Exp. gain: 175%
Full write-up (free guest account required):
PENN Entertainment (PENN), mcap=$4600m