TPCA - Tropicana Entertainment

[Packer16]

This is a cheap gaming company 3.3x EBITDA but is majority owned by Icahn Enterprises.  It was brought out of bankruptcy in 2011 and looks to acquire other casinos.  It has no debt so it has the firepower to buy if they find bargains (which Icahn is good at locating).  From an operations perspective this looks like a good deal but I am concerned about the majority owner.  Has any one had a less than fair experience with Carl Icahn or his affiliates?  If so, maybe that is why there is discount. 

 

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[AchilliesValue]

Icahn is usually ok to invest with but be careful if you plan to hold long term as he has a history of loading up on debt for a short term catalyst that might not help the company in the long term. 

 

In regards to Tropicana I'd expect him to go on an acquisition spree then try to flip the company.  Otherwise I don't understand why he'd issue the debt with the cash they already had on the balance sheet.  I think he did this with another casino a few years back but the name is escaping me.

[Hielko]

He bought the Fontainebleau Resort in Vegas (not sure what's he doing with that one) and he flipped American Casino & Entertainment Properties a few years ago. He bought for 300M in 1998, and sold for 1.3 billion on 2007 (that was probably pretty lucky timing)

[constructive]

Up 35% in the last 3 months on improved earnings and the announcement that they are buying the Lumiere Place casino and related hotels in St. Louis.

 

TPCA now trades at close to tangible book. But it's not a particularly good business - depreciation/capex is chewing up a lot of profit. May be time to think about exiting this trade. Where would you sell?

[TheEnterprisingInvestor]

I own this one, it's been like watching paint dry until the last month. 

 

I'm not sure these purchases are driving the price.  They paid 7.5x EBITDA for the StL casinos.  Frankly, I'd rather see them buy their own shares at 4x.  That said it's quite cheap relative to the comps and it has some sizeable deferred tax assets that it has taken a valuation allowance against.  Offsetting that is how much of a pit AC is.  Hopefully that stabilizes. 

 

To me the increase is due to either some speculation on the online gaming (in NJ) or perhaps a transaction (take private?) occurring.  I can't figure the likelihood of either of those out, but it's still quite cheap so I'm content to wait it out.  FWIW Icahn carries this at more than $30/sh for IEP, also worth noting that they recently revised the valuation higher so if he was gong to tender for the shares he doesn't own he'd have a hard time doing it for less than carrying value.

[Guest notorious546]

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