Future looking bright for Golden Entertainment

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With the company seeing a 75 percent rise in consolidated net revenues for Q4 2017, Golden Entertainment’s executives were optimistic for the future as they unveiled a $140m redevelopment plan for the Stratosphere.

Golden Entertainment’s deal to acquire American Casino & Entertainment Properties (ACEP) moved the firm further into the casino space, with the company’s set to up the stakes at the Stratosphere as it heads back out on the acquisitions trail in 2018.
Golden Entertainment’s consolidated net revenues for Q4 2017 were $184.3m, up 75 percent compared to $105.4m in the prior-year quarter.
The company stated that this increase in net revenues was driven primarily by the inclusion of 73 days of ACEP operations in Q4 as well as continued revenue growth across the Golden Entertainment’s existing casinos and distributed gaming operations.
“We concluded our already strong fiscal 2017 with another quarter of solid operating results. Our current scale, both operationally and financially …demonstrates that our strategic initiatives are paying off and that we’ve transformed the business with our acquisition of ACEP,” said Blake Sartini, chairman and CEO of Golden Entertainment, speaking during the company’s earnings call.
“2017 was a year of progress for our company as we saw solid organic growth across all of our legacy operations throughout the year while completing the American Casino acquisition, which significantly expanded our Southern Nevada operations.
“The addition of the Stratosphere Casino, Hotel & Tower, Arizona Charlie’s Decatur, Arizona Charlie’s Boulder and the Aquarius Casino Resort to our portfolio of casinos, taverns and route operations has dramatically expanded our business with more market-leading assets.”
Net revenues for the casino operations in Q4 2017 were $101.2m compared to $24.1m in the prior-year period, reflecting the contributions from the ACEP venues during the quarter.
Golden Entertainment recorded a net loss of $13.4m in Q4 2017 compared to net income of $10.0m in the prior-year quarter, driven primarily by the inclusion of corporate and other costs associated with the ACEP acquisition on 20 October 2017.
“Since completing the American Casinos & Entertainment Properties acquisition in the fourth quarter, we have realised approximately $14m of our targeted $18m in cost synergies with the balance expected to be achieved by the end of 2018,” said Charles Protell, Golden Entertainment’s CFO.
“Our strong cash flow and healthy financial position will allow us to fund approximately $80m in planned capital expenditures for 2018, and we also expect to reduce our net leverage ratio to between 4.5x-4.75x by year end.
“In addition, we remain active in evaluating strategic opportunities across both our casino and distributed gaming businesses that could further our goal of expanding the scale of our entertainment and gaming platform.”
During the earnings call, the company’s executives gave further details of Golden Entertainment’s redevelopment plans for the Stratosphere, which will include a complete renovation of over 1,100 rooms – nearly half of the existing room base – the addition of new food and beverage outlets, a remodelled sports book, and the creation of 50,000 sq ft of meeting space targeted at “modest-sized groups and conventions”, along with new attractions and other upgrades to the property.
Work on the $140m redevelopment project will begin in Q2 2018, with construction planned to be phased over a three-year period, ending in summer 2021.
The company has budgeted approximately $32m for Phase I of the redevelopment, which is scheduled to be completed in the latter part of Q4 2018.
“We expect our master plan development for the Stratosphere to generate a return on invested capital of approximately 15 to 20 percent when finished,” Sartini continued.
“Las Vegas will be supported by a significant capital investment and a further diversification of its economy. “Large-scale projects on the north end of the Las Vegas Strip, including Genting, Resorts World, the expansion of the Las Vegas Convention Center and the investment to complete the former Fontainebleau are bringing traffic and infrastructure to our doorstep at the Stratosphere.”
Sartini added that Golden Entertainment is also looking at developing “approximately 16 acres of excess owned real estate” surrounding the Stratosphere.
“We believe this also has enormous long-term potential for expansion, though this is not part of the initial master plan,” he clarified.

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