So where does this leave us? ASCA is an economically sensitive stock with few catalysts. The positive catalysts that do exist are related to November state referendums: table limit betting increase in Colorado and the loss limit removal in Missouri. There are other ways to play those catalysts. The downside catalysts are more numerous: The economy and gas prices, a leveraged balance sheet and big debt maturities in 2010 ($1.3bn), and new casinos in Kansas and St. Louis. Let’s not forget the near term biggie: the hit on Ameristar East Chicago from the massive expansion and renovation of the Horseshoe in Northern Indiana.
PENN is not without its own economic vulnerability. However, I keep coming back to liquidity. To me liquidity is the single most differentiating factor in this struggling industry. Why would I pay the same multiple for ASCA as I would for PENN, the gaming company with the most liquidity, run by the best stewards of capital. PNK also looks more attractive at a 0.5-1.0x multiple discount and a buffer from the economic environment due to its Texas exposure. For those targeting ASCA as an acquisition candidate; that may eventually be the case but it likely won’t be PENN on the other end of that transaction. If PENN is buying any company it will be PNK.