Monarch Casino Maintains Selective Approach to M&A, Potential for Another Special Dividend

Monarch Casino & Resort (MCRI) has been making significant strides this year, with its stock surging by an impressive 30.43%. This growth has outpaced the S&P 500 by a substantial margin of more than 2-to-1. Despite operating only two casinos – the Atlantis in Reno and its property in Black Hawk, Colo. – Monarch continues to see substantial growth in its value.

Truist Securities analyst Barry Jonas highlights that Monarch remains cautious when considering mergers or acquisitions. While they remain selective about potential deals, they are open to expanding their portfolio under specific conditions. Monarch aims to target properties where they also own the real estate, focusing on regions with robust regulations and in markets that do not allow iGaming.

Black Hawk, where Monarch’s property is located, recently joined the National Association Against iGaming (NAAG), making it the first casino municipality in the US to do so. With this move, Monarch is unlikely to consider expanding into states like Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia.

If Monarch fails to identify viable acquisition targets over the next two years, they have alternative plans in place to keep their investors engaged. Jonas suggests that the company could opt to issue another special dividend alongside regular quarterly payouts and opportunistic share repurchases if a deal is not struck within the specified timeframe. Despite receiving acquisition offers in the past, Monarch is in no rush to sell and is keen on maximizing shareholder returns.

Colorado, particularly the Black Hawk region, represents a lucrative gaming market for Monarch. With Denver being a key feeder market to Las Vegas, there is ample opportunity for Monarch to capture more market share by attracting local customers. Although real estate constraints may impede Monarch’s ability to expand in Colorado, management remains open to exploring all opportunities in the market, including potential mergers and acquisitions.

While Bally’s, Caesars, Century Casinos, and Penn Entertainment are key operators in Black Hawk, it remains uncertain if they would be willing sellers, considering the region’s attractiveness as a gaming jurisdiction. Given the growth potential in the Black Hawk market and the opportunities it presents, Monarch continues to focus on maximizing its presence in this region. Overall, Monarch Casino & Resort’s careful and strategic approach to mergers and acquisitions reflects its commitment to enhancing shareholder value and ensuring sustainable growth in the long term.