Wow! We knew management was making progress on the cost side but this exceeded our expectations by a wide margin. Should the stock go up on this? Absolutely. Will it? Yes, but probably not enough. Even with a big move up today, the stock will likely still trade around 6-6.5x 2010 EV/EBITDA versus the US regional comp group at 7-7.5x. An argument can be made that GC's business model is more attractive than the US guys (see our 4/5/09 note for the thesis, "GC: GOOD CANADIAN GAMING"). GC is definitely a "show me" stock, but Q1 is definitely a start.
Revenues were a little below expectations but EBITDA bested our projection by 19% and the Street by 27%. EBITDA margin increased 370bps YoY to 30.5% despite an 4% revenue decline. The good news? Most of these cost cuts appear sustainable. Numbers are going higher, despite the revenue decline. Here are the property details.
For those of you who like details, the following are the conference call and property highlights:
RiverRock:
- Gaming revenues in line with our expectation, normal hold
- Hospitality & other revenues came in a little light, caused by the construction disruption which led to the temporary relocation of several food & beverage outlets and reduction in room capacity to 195 room from 202
- Costs came in 1.9MM lower than our estimate, and were down 13% Y-O-Y due to reduced staffing levels and reduced variable costs
Boulevard:
- Gaming revenues were 1% better than our estimate
- Table drop was better than we expected, up 7% y-o-y, but hold was weak at 18.3% vs our 19.15% estimate, costing GC 300k of revenues
- Slot handle was weaker than we expected though, down 11% y-o-y, but had slightly better win %
- F&B and other was 26% better than our estimate
- Costs were 8% lower than 1Q08 and 1.1MM below our estimate
- EBITDA was up 11% and margins increased 460bps to 46%
Vancouver Island:
- Gaming revenues came in 1.4% better than our estimate
- Table drop was very weak, coming in 15% below our estimate, hold was 1% above our estimate. However, table revenues are only 1.3MM at these 2 properties so the hold differential was de minimis
- Slot handle was a little better than our estimate down 4%, win % was normal
- Hospitality and Other was materially lower than our estimate down 27% y-o-y (again very small number to begin with)
- There was some construction disruption
- Costs were down 20% y-o-y, much better than our estimate
- EBITDA was up 2% and margins were up 6.2% to 57.6%
Nova Scotia:
- Gaming revenues came in 5% below our estimate
- Table drop a little better than we expected, hold was normal
- Slot handle 2% below our expectation, win % was normal
- Hospitality & other came in 200k above our estimate and 21% better y-o-y
- Costs were in line with our estimate (remember that cost reductions at this property began in 2Q08)
- EBITDA was up 133% and margins were 20.2% vs 8.4% last year - this is the last quarter of easy comps
Racinos:
- Table drop increased 17% y-o-y, although hold was 2.2% below normal levels, impacting revenues by 600k
- Hospitality and other came in 150k better than our expectations
- EBITDA came in 22% better and margins came in 330bps better
- In CAD dollars revenues increased 29% and EBITDA increased 44%
- CAD dollar decline 20% in value vs USD at the end of 1Q09, if spot rates stay constant the decline should be closer to 13% for 2Q