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Once upon a time there was a rich village. The wealthiest of the villagers decided to hide a huge lump of gold to protect it from bandits and robbers. So he buried in in a nearby field.
Many years later, the village was no longer rich, and the rice field was abandoned and unused. A poor farmer decided to plow the field. After some time plowing, it just so happened that his plow struck the long-forgotten buried treasure.
At first he thought it must be a very hard tree root. But when he uncovered it, he saw that is was beautiful shining gold. Since it was daytime he was afraid to try and take it with him. So he covered it up again and waited for nightfall.
The poor farmer returned in the middle of the night. Again he uncovered the golden treasure. He tried to lift it, but it was far too heavy. He tied ropes around it and tried to drag it. But it was so huge he couldn't budge it an inch. He became frustrated, thinking he was lucky to find a treasure, and unlucky to not be able to take it with him. He even tried kicking the lump of gold. But again it wouldn't budge an inch!
Then he sat down and began to consider the situation. He decided the only thing to do was to break the lump of gold into four smaller lumps. Then he could carry home one piece at a time.
He thought, "One lump I will use for ordinary day-to-day living living. The second lump I will save for a rainy day. The third lump I will invest in my farming business, the 4th for poor and needy and for other good works."
With a calm mind he went home, and fell into a blissful sleep, knowing he had solved all of his problems.
When he awoke, to his horror he discovered a large man with 19” biceps carrying the huge lump of gold away on his shoulder. The farmer yelled, “How can you do that??” to which the large man replied, “I am HUGE!”.
Today I sold MCRI at 42.01. That’s a 16% gain over my purchase price of 36.32. A 16% gain in only 5 weeks!! Can you do that? You? YOU? YOU???
I am HUGE! Bring me your finest meats and cheeses. Over the same period, the S&P 500 was only up 1.8% Ah ha ha ha ha ha ha!!! $$$MR. MARKET$$$ wins again. That makes 64 consecutive profitable trades of 15% or better. I am HUGE. The market is a tiny. I have to howl when I think about all of those mutual fund managers on CNBC making excuses because their funds underperform the S&P 500. Are you kidding me?? I make those guys my girlfriend. I put them on my Cheerios in the morning. Put me on CNBC, and I’ll show them a pair of 19” pipes they will never forget.
The good news is that there will be another pick coming for Christmas. But first, you have to tell the world how great $$$MR. MARKET$$$ is.
I am HUGE!
================================================== ======
11-12-2004, 01:21 PM
mrmarket
Administrator Join Date: Sep 2003
Posts: 906
MCRI ==> The Veteran's Day Winner
--------------------------------------------------------------------------------
There is something magical about when Titan Alpha and Titan Omega walk into a casino. The flashing lights, the voluptuous cocktail waitresses, the hazy cigar smoke, the booze flowing freely, the slot machines singing all come together in a magma of hedonism that only a true Titan can understand. This year the Titans were counting down the days to a Las Vegas rendezvous. Alas, twas only a force of nature as large as a hurricane that kept Titan Omega from making his rightful pilgrimage to Vegas. What to do…what to do…it seems like there is only one solution. Only the lost city of Atlantis has enough size and scope to fully satisfy the two Titans with pent up desires for the wants of the casino. Maybe Reno is the next stop.
Today I bought Monarch Casino & Resort, Inc (MCRI) at 36.32. I will sell it in 4 to 6 weeks at 42.01. Here is why I like MCRI.
Monarch Casino & Resort, Inc., incorporated in 1993, owns and operates the tropically-themed Atlantis Casino Resort (the Atlantis), a hotel/casino facility in Reno, Nevada, through its wholly owned subsidiary, Golden Road Motor Inn, Inc. The Atlantis features approximately 51,000 square feet of casino space interspersed with waterfalls, giant artificial palm trees, thatched-roof huts and other tropical decor; a hotel and a motor lodge with 980 guest rooms; nine food outlets; an enclosed pool with waterfall; an outdoor pool; a health spa; two retail outlets offering clothing and traditional gift-shop merchandise; a full-service salon for men and women; an 8,000-square-foot, family entertainment center, and approximately 25,000 square feet of banquet, convention and meeting room space.
MCRI stock is up 225% in the last 12 months yet its PE is only 19.4. MCRI resides in one of the hottest industries there is….gaming and leisure.
With W. once again winning the election, the country has made a statement that they want to return to family values. Hogwash! Look at casino earnings. The country wants to bet bet bet bet bet bet bet. We are flawed humanoids who always succumb to the temptation of something for nothing. Just axe Titan Omega.
When it comes to the casino business, it’s a simple game of PacMan. The big are getting bigger. The little guys, like MCRI, will continue to profit but at the end of the day one of the big guys will be there to snap up its earnings. Either way, investors in MCRI will benefit.
To be able to really appreciate this company, it helps to know a little about its history.The Company was founded in 1972 as a partnership between David Farahi (the father of John, Bob and Ben Farahi) and his brother-in-law Isaac Poura, when the two purchased the Golden Door Motel on the southeast corner of South Virginia Street and Peckham Lane in Reno. At the time, the Golden Door Motel was a somewhat dilapidated two-story,142-room motel with an adjoining single-story building containing the motel lobby, a small coffee shop, a lounge with music and dancing, an outdoor pool and a small building used for banquets, all of which was situated on approximately 4 acres of leased land.
By mid-1973, Farahi and Poura recognized that their business philosophies were incompatible, and Farahi agreed to buy out Poura's interest in the Company. By 1976, with Bob, John, and Ben increasingly involved in running the business, David transferred his ownership of the Company to his three sons along with their sister Jila. John had by this time moved to Reno and was working with Bob full-time at the business, and Ben joined the business full-time a few years later.
During the 1970s, the business struggled. Located at the far south end of the developed portion of Reno, the Golden Road Motel was well out of the way of what was then Reno's tourism corridor, and relied on business from the adjacent convention center and overflow from downtown during special events to survive. The three brothers worked in every conceivable capacity, at times sleeping behind the front desk on a cot during a 24-hour shift.
In 1986, the Company was presented with the opportunity to purchase a 15.8 acre vacant land parcel on the northwest corner of South Virginia Street and Peckham Lane from the estate of Lincoln Fitzgerald. Even though the Company was still quite small at this time, the Farahi brothers foresaw the strategic potential of controlling two key sites in fast-growing southwest Reno within walking distance of the Reno Sparks Convention Center, and made the stretch to acquire the property. The Farahis then secured the zoning needed to operate a large scale hotel casino on the site, ensuring the site's future viability.
In 1988, the Company completely renovated and remodeled the property. The motel was upgraded to a Quality Inn, and the restaurant and lounge were expanded and renovated into the basic structure that is now the Purple Parrot restaurant at the Atlantis Casino Resort.
Following the successful completion of this expansion in early 1988, the property's appeal with local residents grew exponentially, and the restaurant and lounge/nightclub became one of the most frequented locales in southwest Reno. Flush with the success of this latest venture, the Farahi brothers were convinced that the time was right to develop the property on a much grander scale. Joining forces with well known Reno architect Peter Wilday, who had designed many of northern Nevada's most successful hotel casino properties, including the Peppermill and John Ascuaga's Nugget, the Company set out to develop and build a major hotel casino on the 8 acre site.
In 1990, with financing in place and an unrestricted gaming license from the State of Nevada in hand, the Company moved the remainder of the motel units to the northeast boundary line of the 8-acre site, and began construction of a 160-room high-rise hotel tower and a low-rise structure containing approximately 16,000 square feet of gaming space with approximately 500 slot machines and 21 table games, an additional restaurant, several bars, a health club, and an outdoor pool. Completed in 8 months and within 2% of budget, the hotel casino opened in April of 1991 as the Clarion Hotel Casino under a licensing agreement with Choice Hotels International. Shortly thereafter in 1992, the Company added an upscale restaurant and nightclub, as well as 2,000 square feet of additional casino space with approximately 50 additional slot machines.
With its open, airy atmosphere and tropical theme, marked by waterfalls, thatched-roof huts and palm trees, the property was an instant success. In 1990, the year before the opening of the hotel casino, the Company had revenues of $5.2 million and EBITDA of $1.4 million. In 1992, the first full year of operation of the Clarion Hotel Casino, the Company's revenues climbed to $23.2 million and EBITDA rose to $4.9 million. With the hotel and restaurants operating near capacity, and the gaming business growing strongly, the Company was by late 1992 again looking to expand the hotel casino.
In early 1993, with a strong stock market looking very favorably on offerings from gaming-related concerns, the Company decided to explore the possibility of raising capital for an expansion of the Clarion Hotel Casino through a public offering of stock.
In October 1993, construction commenced on an expansion consisting of a new high-rise hotel tower containing approximately 283 rooms and suites, 14,000 square feet of additional gaming space with an additional 450 slot machines and 14 table games, a 300-seat buffet restaurant, 10,000 square feet of banquet and meeting space, an 8,000 square foot family entertainment center and numerous other amenities. Eleven months later and within budget, the expansion project was completed and open to the public. The expanded property once again met with very favorable customer acceptance, achieving occupancy rates of over 85% the first quarter following the opening, and over 90% the following quarter.
The Company once again set its sights on expansion. This time, the Company brought forth the culmination of its vision for the Clarion Hotel Casino, seeking and gaining the approval of the City of Reno of a master plan for the hotel casino which when its first phase is completed would give the property a total of approximately 920 hotel rooms, 25,000 square feet of additional casino space, approximately 78,000 square feet of additional public space including a 50,000 square foot special events plaza and several new restaurants. The approval of this master plan also included overhead pedestrian walkways connecting the Atlantis with the Company's 15.8 acre site across Virginia Street, and connecting the Atlantis with the Reno Sparks Convention Center across Peckham Lane as well a more than 1800 space parking garage. At the Company's option, the project could be built all at once or in phases. Later that year, the Company made another major step in preparing for the future by announcing that in April of 1996, the Company would terminate its licensing agreement with Choice Hotels International and rename the hotel casino the Atlantis Casino Resort.
Driven by increasing popularity with patrons from the rapidly growing residential and industrial communities in south Reno, as well as rebounding hotel results, effective marketing programs, and a continued emphasis on cost control, the Atlantis turned in record performance for 1997, generating EBITDA of $13.3 million on net revenues of $59.1 million.
Then in 1998, in a market that was even less interested in single property casino companies than it was in 1993, particularly if they were located in Reno, management did something which again most pundits said could not be done. Management decided to proceed with the aforementioned phase I of the master plan. Soon it was decided that this expansion would be entirely paid for by operating cashflow and bank borrowings. Construction began mid-May 1998 and approximately 13 months later, in early July, the Atlantis property was operating with over 900 rooms and suites, over 1300 gaming machines, several new restaurants, an expanded 640 seat buffet and approximately 14,500 square feet of new meeting space.
The tropically-themed interior of the Sky Terrace contains the Oyster Bar, a video poker bar, banks of slot machines, a lounge area with oversized leather sofas and chairs and, since May 2003, a sushi bar. The Sushi Bar replaced the coffee and pastry bar that was located adjacent to the lounge area. There ain’t nothing better than oysters and sushi after 27 consecutive hours of beer drinking and gambling. Boy..talk about an oil leak.
Beautiful, ain’t it??? Not only is it pretty…but it prints money. Monarch Casino & Resort, Inc. announced its second successive all-time Company record for the quarter ended September 30, 2004. The Company's net income, earnings per share, EBITDA (1), casino revenue, hotel revenue, and net revenue during the 2004 third quarter eclipsed all such previous quarterly results, including its previous record-setting second quarter ended June 30, 2004. Net income for the Company during the third quarter ended September 30, 2004, was $5,552,438, or $0.59 per diluted share. This marks a 51.5% improvement over net income of $3,665,814, and $0.39 per diluted share, in the third quarter ended September 30, 2003, and a 27.6% improvement over its previous record quarterly net income set in the second quarter of 2004. The Company's nine-month earnings per share of $1.35 is a 32% improvement over the full year 2003 per share earnings of $1.02. EBITDA (1) for the third quarter was $10,858,147, or 23.4% better than the $8,797,634 EBITDA (1) from the third quarter last year.
This isn’t just a flash in the pan. MCRI has seen its revenues grow each and every year since 1994 (a growth rate of 10% per year vs. Industry Average of 7%). It has seen year on year operating income growth for each of the last 5 years. It has successfully pared down debt, while growing its business, from 74% of capitalization in 1999 to 43% last year.
What does all of this mean for share price? 2003 earnings clocked in at $1.02/share. 2004 earnings will most likely by around $1.70 and 2005 earnings will probably reach $2.35/share. Even at the modest PE of 19, this projects to a stock price of $44.65, which is well past my sell target. Furthermore, the entire gaming industry is sporting a PE of 27. So even if you apply the 2004 earnings of $1.70 to the industry forward PE of 27, you get $45.90. MCRI’s price to cash flow is only 12.5 compared to the industry average of 15.1. This valuation difference alone is enough to propel the stock price upwards by 20%.
So either way that you look at it, on a growth or a valuation basis, MCRI is a success story in the making. Look at the rolling 12 month EPS:
Date 12-mos Rolling EPS
09/2004 1.54
06/2004 1.34
03/2004 1.12
12/2003 1.02
09/2003 0.96
06/2003 0.94
03/2003 0.93
12/2002 0.90
This stock is a freight train! With a Return on Equity of 25.7% (vs. Industry Average of 14.6%) and an Return on Assets of 12.4% (vs. an Industry Average of 4.3%), it is clear that management has captured the formula to make money in this business. The balance sheet is becoming rich in assets while its liability base is shrinking. Look at these stats:
MCRI vs. the Industry:
Total Debt to Equity 0.5 vs. 1.7
Long Term Debt to Equity 0.5 vs 1.7
Interest Coverage TTM 15.9 vs. 5.8
The beauty of it is that most of their incremental operating costs are small so as their new revenue from demographic growth comes in, most of it will fall to the bottom line. The facts bear this out. Look at the net margin growth:
Sep 2004 Dec 2003 Dec 2002 Dec 2001
REV $127 mil $116 mil $111 mil $105 mil
EARNINGS$14 mil $10 mil $9 mil $5 mil
EPS $1.53 $1.02 $.90 $.49
NET MGN 11.4% 8.3% 7.7% 4.4%
MCRI’s price to cash flow is only 12.5 compared to the industry average of 15.1. This valuation difference alone is enough to propel the stock price upwards by 20%.
Here’s what the big cheese has to say (the guy that used to sleep on the cot behind the front desk):
Commenting on the Company's all-time record quarter, John Farahi, its Chief Executive Officer and Co-Chairman, said: "Obviously, we are very pleased about the record results once again. The increase in our revenues and operating margins are attributable to our superior product and service. All in all, about 52% of the additional revenue flowed through to the bottom line, resulting in a 5.4 percentage point increase in operating margin year over year to 25.1%, our best ever. I am extremely proud of all our team members' continuing efforts and valuable contributions. We continue to benefit from local population growth, constant physical improvement to the property, increases in convention bookings at the Reno-Sparks Convention Center and management's continuous attention to detail." Mr. Farahi later added: "We are also very excited about our latest physical enhancement to the Atlantis, a new expansive paver driveway and entrance to the Atlantis that are accentuated with three colossal, show-controlled water fountains. The water feature and expanded driveway, which opened on September 30, 2004, is another distinguishing feature which will both provide a more customer efficient entrance to our resort and enhance our mystique as one of the premier hotel casinos in northern Nevada."
Sounds like a poor man’s Bellagio with those stupid water fountains. Why do they want those things OUTSIDE the casino anyway? Don't they want people inside? Anyway, I can’t wait to go there with Titan Omega. We will smoke cigars so long that my arm won’t be able to reach the end to light them. We will drink so much booze and eat so many oysters that we will set up the fire alarm with our flatulence. Oh it would be glorious.
I am HUGE!!
$$$MR. MARKET$$$
Many years later, the village was no longer rich, and the rice field was abandoned and unused. A poor farmer decided to plow the field. After some time plowing, it just so happened that his plow struck the long-forgotten buried treasure.
At first he thought it must be a very hard tree root. But when he uncovered it, he saw that is was beautiful shining gold. Since it was daytime he was afraid to try and take it with him. So he covered it up again and waited for nightfall.
The poor farmer returned in the middle of the night. Again he uncovered the golden treasure. He tried to lift it, but it was far too heavy. He tied ropes around it and tried to drag it. But it was so huge he couldn't budge it an inch. He became frustrated, thinking he was lucky to find a treasure, and unlucky to not be able to take it with him. He even tried kicking the lump of gold. But again it wouldn't budge an inch!
Then he sat down and began to consider the situation. He decided the only thing to do was to break the lump of gold into four smaller lumps. Then he could carry home one piece at a time.
He thought, "One lump I will use for ordinary day-to-day living living. The second lump I will save for a rainy day. The third lump I will invest in my farming business, the 4th for poor and needy and for other good works."
With a calm mind he went home, and fell into a blissful sleep, knowing he had solved all of his problems.
When he awoke, to his horror he discovered a large man with 19” biceps carrying the huge lump of gold away on his shoulder. The farmer yelled, “How can you do that??” to which the large man replied, “I am HUGE!”.
Today I sold MCRI at 42.01. That’s a 16% gain over my purchase price of 36.32. A 16% gain in only 5 weeks!! Can you do that? You? YOU? YOU???
I am HUGE! Bring me your finest meats and cheeses. Over the same period, the S&P 500 was only up 1.8% Ah ha ha ha ha ha ha!!! $$$MR. MARKET$$$ wins again. That makes 64 consecutive profitable trades of 15% or better. I am HUGE. The market is a tiny. I have to howl when I think about all of those mutual fund managers on CNBC making excuses because their funds underperform the S&P 500. Are you kidding me?? I make those guys my girlfriend. I put them on my Cheerios in the morning. Put me on CNBC, and I’ll show them a pair of 19” pipes they will never forget.
The good news is that there will be another pick coming for Christmas. But first, you have to tell the world how great $$$MR. MARKET$$$ is.
I am HUGE!
================================================== ======
11-12-2004, 01:21 PM
mrmarket
Administrator Join Date: Sep 2003
Posts: 906
MCRI ==> The Veteran's Day Winner
--------------------------------------------------------------------------------
There is something magical about when Titan Alpha and Titan Omega walk into a casino. The flashing lights, the voluptuous cocktail waitresses, the hazy cigar smoke, the booze flowing freely, the slot machines singing all come together in a magma of hedonism that only a true Titan can understand. This year the Titans were counting down the days to a Las Vegas rendezvous. Alas, twas only a force of nature as large as a hurricane that kept Titan Omega from making his rightful pilgrimage to Vegas. What to do…what to do…it seems like there is only one solution. Only the lost city of Atlantis has enough size and scope to fully satisfy the two Titans with pent up desires for the wants of the casino. Maybe Reno is the next stop.
Today I bought Monarch Casino & Resort, Inc (MCRI) at 36.32. I will sell it in 4 to 6 weeks at 42.01. Here is why I like MCRI.
Monarch Casino & Resort, Inc., incorporated in 1993, owns and operates the tropically-themed Atlantis Casino Resort (the Atlantis), a hotel/casino facility in Reno, Nevada, through its wholly owned subsidiary, Golden Road Motor Inn, Inc. The Atlantis features approximately 51,000 square feet of casino space interspersed with waterfalls, giant artificial palm trees, thatched-roof huts and other tropical decor; a hotel and a motor lodge with 980 guest rooms; nine food outlets; an enclosed pool with waterfall; an outdoor pool; a health spa; two retail outlets offering clothing and traditional gift-shop merchandise; a full-service salon for men and women; an 8,000-square-foot, family entertainment center, and approximately 25,000 square feet of banquet, convention and meeting room space.
MCRI stock is up 225% in the last 12 months yet its PE is only 19.4. MCRI resides in one of the hottest industries there is….gaming and leisure.
With W. once again winning the election, the country has made a statement that they want to return to family values. Hogwash! Look at casino earnings. The country wants to bet bet bet bet bet bet bet. We are flawed humanoids who always succumb to the temptation of something for nothing. Just axe Titan Omega.
When it comes to the casino business, it’s a simple game of PacMan. The big are getting bigger. The little guys, like MCRI, will continue to profit but at the end of the day one of the big guys will be there to snap up its earnings. Either way, investors in MCRI will benefit.
To be able to really appreciate this company, it helps to know a little about its history.The Company was founded in 1972 as a partnership between David Farahi (the father of John, Bob and Ben Farahi) and his brother-in-law Isaac Poura, when the two purchased the Golden Door Motel on the southeast corner of South Virginia Street and Peckham Lane in Reno. At the time, the Golden Door Motel was a somewhat dilapidated two-story,142-room motel with an adjoining single-story building containing the motel lobby, a small coffee shop, a lounge with music and dancing, an outdoor pool and a small building used for banquets, all of which was situated on approximately 4 acres of leased land.
By mid-1973, Farahi and Poura recognized that their business philosophies were incompatible, and Farahi agreed to buy out Poura's interest in the Company. By 1976, with Bob, John, and Ben increasingly involved in running the business, David transferred his ownership of the Company to his three sons along with their sister Jila. John had by this time moved to Reno and was working with Bob full-time at the business, and Ben joined the business full-time a few years later.
During the 1970s, the business struggled. Located at the far south end of the developed portion of Reno, the Golden Road Motel was well out of the way of what was then Reno's tourism corridor, and relied on business from the adjacent convention center and overflow from downtown during special events to survive. The three brothers worked in every conceivable capacity, at times sleeping behind the front desk on a cot during a 24-hour shift.
In 1986, the Company was presented with the opportunity to purchase a 15.8 acre vacant land parcel on the northwest corner of South Virginia Street and Peckham Lane from the estate of Lincoln Fitzgerald. Even though the Company was still quite small at this time, the Farahi brothers foresaw the strategic potential of controlling two key sites in fast-growing southwest Reno within walking distance of the Reno Sparks Convention Center, and made the stretch to acquire the property. The Farahis then secured the zoning needed to operate a large scale hotel casino on the site, ensuring the site's future viability.
In 1988, the Company completely renovated and remodeled the property. The motel was upgraded to a Quality Inn, and the restaurant and lounge were expanded and renovated into the basic structure that is now the Purple Parrot restaurant at the Atlantis Casino Resort.
Following the successful completion of this expansion in early 1988, the property's appeal with local residents grew exponentially, and the restaurant and lounge/nightclub became one of the most frequented locales in southwest Reno. Flush with the success of this latest venture, the Farahi brothers were convinced that the time was right to develop the property on a much grander scale. Joining forces with well known Reno architect Peter Wilday, who had designed many of northern Nevada's most successful hotel casino properties, including the Peppermill and John Ascuaga's Nugget, the Company set out to develop and build a major hotel casino on the 8 acre site.
In 1990, with financing in place and an unrestricted gaming license from the State of Nevada in hand, the Company moved the remainder of the motel units to the northeast boundary line of the 8-acre site, and began construction of a 160-room high-rise hotel tower and a low-rise structure containing approximately 16,000 square feet of gaming space with approximately 500 slot machines and 21 table games, an additional restaurant, several bars, a health club, and an outdoor pool. Completed in 8 months and within 2% of budget, the hotel casino opened in April of 1991 as the Clarion Hotel Casino under a licensing agreement with Choice Hotels International. Shortly thereafter in 1992, the Company added an upscale restaurant and nightclub, as well as 2,000 square feet of additional casino space with approximately 50 additional slot machines.
With its open, airy atmosphere and tropical theme, marked by waterfalls, thatched-roof huts and palm trees, the property was an instant success. In 1990, the year before the opening of the hotel casino, the Company had revenues of $5.2 million and EBITDA of $1.4 million. In 1992, the first full year of operation of the Clarion Hotel Casino, the Company's revenues climbed to $23.2 million and EBITDA rose to $4.9 million. With the hotel and restaurants operating near capacity, and the gaming business growing strongly, the Company was by late 1992 again looking to expand the hotel casino.
In early 1993, with a strong stock market looking very favorably on offerings from gaming-related concerns, the Company decided to explore the possibility of raising capital for an expansion of the Clarion Hotel Casino through a public offering of stock.
In October 1993, construction commenced on an expansion consisting of a new high-rise hotel tower containing approximately 283 rooms and suites, 14,000 square feet of additional gaming space with an additional 450 slot machines and 14 table games, a 300-seat buffet restaurant, 10,000 square feet of banquet and meeting space, an 8,000 square foot family entertainment center and numerous other amenities. Eleven months later and within budget, the expansion project was completed and open to the public. The expanded property once again met with very favorable customer acceptance, achieving occupancy rates of over 85% the first quarter following the opening, and over 90% the following quarter.
The Company once again set its sights on expansion. This time, the Company brought forth the culmination of its vision for the Clarion Hotel Casino, seeking and gaining the approval of the City of Reno of a master plan for the hotel casino which when its first phase is completed would give the property a total of approximately 920 hotel rooms, 25,000 square feet of additional casino space, approximately 78,000 square feet of additional public space including a 50,000 square foot special events plaza and several new restaurants. The approval of this master plan also included overhead pedestrian walkways connecting the Atlantis with the Company's 15.8 acre site across Virginia Street, and connecting the Atlantis with the Reno Sparks Convention Center across Peckham Lane as well a more than 1800 space parking garage. At the Company's option, the project could be built all at once or in phases. Later that year, the Company made another major step in preparing for the future by announcing that in April of 1996, the Company would terminate its licensing agreement with Choice Hotels International and rename the hotel casino the Atlantis Casino Resort.
Driven by increasing popularity with patrons from the rapidly growing residential and industrial communities in south Reno, as well as rebounding hotel results, effective marketing programs, and a continued emphasis on cost control, the Atlantis turned in record performance for 1997, generating EBITDA of $13.3 million on net revenues of $59.1 million.
Then in 1998, in a market that was even less interested in single property casino companies than it was in 1993, particularly if they were located in Reno, management did something which again most pundits said could not be done. Management decided to proceed with the aforementioned phase I of the master plan. Soon it was decided that this expansion would be entirely paid for by operating cashflow and bank borrowings. Construction began mid-May 1998 and approximately 13 months later, in early July, the Atlantis property was operating with over 900 rooms and suites, over 1300 gaming machines, several new restaurants, an expanded 640 seat buffet and approximately 14,500 square feet of new meeting space.
The tropically-themed interior of the Sky Terrace contains the Oyster Bar, a video poker bar, banks of slot machines, a lounge area with oversized leather sofas and chairs and, since May 2003, a sushi bar. The Sushi Bar replaced the coffee and pastry bar that was located adjacent to the lounge area. There ain’t nothing better than oysters and sushi after 27 consecutive hours of beer drinking and gambling. Boy..talk about an oil leak.
Beautiful, ain’t it??? Not only is it pretty…but it prints money. Monarch Casino & Resort, Inc. announced its second successive all-time Company record for the quarter ended September 30, 2004. The Company's net income, earnings per share, EBITDA (1), casino revenue, hotel revenue, and net revenue during the 2004 third quarter eclipsed all such previous quarterly results, including its previous record-setting second quarter ended June 30, 2004. Net income for the Company during the third quarter ended September 30, 2004, was $5,552,438, or $0.59 per diluted share. This marks a 51.5% improvement over net income of $3,665,814, and $0.39 per diluted share, in the third quarter ended September 30, 2003, and a 27.6% improvement over its previous record quarterly net income set in the second quarter of 2004. The Company's nine-month earnings per share of $1.35 is a 32% improvement over the full year 2003 per share earnings of $1.02. EBITDA (1) for the third quarter was $10,858,147, or 23.4% better than the $8,797,634 EBITDA (1) from the third quarter last year.
This isn’t just a flash in the pan. MCRI has seen its revenues grow each and every year since 1994 (a growth rate of 10% per year vs. Industry Average of 7%). It has seen year on year operating income growth for each of the last 5 years. It has successfully pared down debt, while growing its business, from 74% of capitalization in 1999 to 43% last year.
What does all of this mean for share price? 2003 earnings clocked in at $1.02/share. 2004 earnings will most likely by around $1.70 and 2005 earnings will probably reach $2.35/share. Even at the modest PE of 19, this projects to a stock price of $44.65, which is well past my sell target. Furthermore, the entire gaming industry is sporting a PE of 27. So even if you apply the 2004 earnings of $1.70 to the industry forward PE of 27, you get $45.90. MCRI’s price to cash flow is only 12.5 compared to the industry average of 15.1. This valuation difference alone is enough to propel the stock price upwards by 20%.
So either way that you look at it, on a growth or a valuation basis, MCRI is a success story in the making. Look at the rolling 12 month EPS:
Date 12-mos Rolling EPS
09/2004 1.54
06/2004 1.34
03/2004 1.12
12/2003 1.02
09/2003 0.96
06/2003 0.94
03/2003 0.93
12/2002 0.90
This stock is a freight train! With a Return on Equity of 25.7% (vs. Industry Average of 14.6%) and an Return on Assets of 12.4% (vs. an Industry Average of 4.3%), it is clear that management has captured the formula to make money in this business. The balance sheet is becoming rich in assets while its liability base is shrinking. Look at these stats:
MCRI vs. the Industry:
Total Debt to Equity 0.5 vs. 1.7
Long Term Debt to Equity 0.5 vs 1.7
Interest Coverage TTM 15.9 vs. 5.8
The beauty of it is that most of their incremental operating costs are small so as their new revenue from demographic growth comes in, most of it will fall to the bottom line. The facts bear this out. Look at the net margin growth:
Sep 2004 Dec 2003 Dec 2002 Dec 2001
REV $127 mil $116 mil $111 mil $105 mil
EARNINGS$14 mil $10 mil $9 mil $5 mil
EPS $1.53 $1.02 $.90 $.49
NET MGN 11.4% 8.3% 7.7% 4.4%
MCRI’s price to cash flow is only 12.5 compared to the industry average of 15.1. This valuation difference alone is enough to propel the stock price upwards by 20%.
Here’s what the big cheese has to say (the guy that used to sleep on the cot behind the front desk):
Commenting on the Company's all-time record quarter, John Farahi, its Chief Executive Officer and Co-Chairman, said: "Obviously, we are very pleased about the record results once again. The increase in our revenues and operating margins are attributable to our superior product and service. All in all, about 52% of the additional revenue flowed through to the bottom line, resulting in a 5.4 percentage point increase in operating margin year over year to 25.1%, our best ever. I am extremely proud of all our team members' continuing efforts and valuable contributions. We continue to benefit from local population growth, constant physical improvement to the property, increases in convention bookings at the Reno-Sparks Convention Center and management's continuous attention to detail." Mr. Farahi later added: "We are also very excited about our latest physical enhancement to the Atlantis, a new expansive paver driveway and entrance to the Atlantis that are accentuated with three colossal, show-controlled water fountains. The water feature and expanded driveway, which opened on September 30, 2004, is another distinguishing feature which will both provide a more customer efficient entrance to our resort and enhance our mystique as one of the premier hotel casinos in northern Nevada."
Sounds like a poor man’s Bellagio with those stupid water fountains. Why do they want those things OUTSIDE the casino anyway? Don't they want people inside? Anyway, I can’t wait to go there with Titan Omega. We will smoke cigars so long that my arm won’t be able to reach the end to light them. We will drink so much booze and eat so many oysters that we will set up the fire alarm with our flatulence. Oh it would be glorious.
I am HUGE!!
$$$MR. MARKET$$$
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