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PENN, came up trumps
🎯 🎰 📈 USD179
Last 12-month cashflow +USD 204 million ⬆️

December 28th, 2020
1 minute read

Sales
Sales had a huge rebound in the third quarter, after three negative growth quarters, rising +270% from the second quarter. At USD 1.13 billion, sales were 147% above our forecast! Gaming revenue was up +284% while hotel & F&B was up by +196%. We assume sales continue to recover to USD 1.36 billion by the third quarter of next year.

Cashflow
Cashflow was back to a positive too, +USS 291 million in the third quarter, a new record high. Investment spending is down to an average of USD 27 million in the last two quarters. We use that in our forecast which together with higher sales, gives an average quarterly free cashflow of +USD 209 billion in this next 12 months.

Sharp sales recovery, lower investment, record cashflow, cheap to assets, higher target price...

Data file & model
Balance sheet
With positive cashflow, the balance sheet net debt dropped to USD 4.68 billion in the third quarter from USD 5.99 billion in the second & USD 6.33 billion a year ago. With our positive cashflow forecast & assuming there is a dividend payment of USD 82 million, the net debt will be lower, USD 3.92 billion in 12 months time.

Profit
After three consecutive losses, net profit was also positive in the third quarter, at USD 141 million. The cash cost ratio of net profit add back non cash costs minus sales as a percent of sales , was only 73%. We use 82% to predict a next 12 months profit of USD 272 million.

Value
PENN has raised a net capital of USD 2.34 billion in the last five years. At the current market value of USD 7.9 billion, it’s 1.52X sales, 0.55X assets, 2.79X equity with a 9.6% profitability & a 1% yield. Our free cashflow forecast is USD 837 million. At 1.6% with a 0.5X adjustment, gives a higher target price of USD179.
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