RE:RE:How High Can Gamehost's Dividend Go?Hi Cpeczek!
I’ll answer your questions in the order of your post.
Oil company capital expenditures It is an absolute reality that the oil industry will not come remotely close to the amount of investment made in the cycle that ended in 2014.
In the past, increasing oil prices would lead to more investment, but not this time around. Oil companies are unwilling to invest big today because of all the talk of peak oil demand due to the energy transition (even though this transition will take much longer than the typical person expects).
How can a CEO justify a billion dollar project that takes 10 years to reach payout when the demand outlook a decade from now is so uncertain and you don’t know what oil price you are going to get because everyone is telling you oil is not going to be needed because the world is going green?
So yes, this has a dampening effect on GH’s revenues and is one of the reasons why I couldn’t get a good handle on Fort McMurray’s population and also why I included a margin of safety in projected 2024 revenues.
These lost jobs are very real but not as severe as it looks at first glance. The jobs in Alberta’s tech industry are rapidly increasing. They are very good paying jobs. There will be more jobs created in the carbon capture and storage field along with blue hydrogen.
ECO Canada, a HR firm in Calgary, says that by 2029, 44,000 jobs will be created in Alberta in the environmental sector as a result of investments made in clean tech, emission reduction and renewable energy.
Alberta's oil and gas workers wrestle with layoffs and an uncharted future | CBC News Also, keep in mind that oil companies will be incredibly profitable. As a result of this, large amounts of taxes will be paid that will aid the government in stimulating the economy and create jobs in many fields.
I don’t have statistics on this but there is a very strong change that there are a disproportionate number of energy investors (individuals) that reside in Alberta relative to other provinces. This high penetration rate will create a lot of spending and job creation as a result of these investors spending their large and increasing dividends they will be receiving from their equity oil investments not to mention the increasing stock prices due to, not in any small part, the massive stock buybacks by the industry which will increase the free cash flow on a per share basis.
So there are some offsets to the lost jobs in the oil patch.
Demographic changes and the implication for our casinos You can put foreign workers coming into Alberta in two separate camps. The first being if a foreign worker comes to Alberta alone, without a family, and the second if the worker comes with a family.
If the foreign worker comes to Alberta alone, I view this as an immediate positive for GH. The foreign worker will mostly associate with the people he/she works with and get to know them. This will lead to outings with these newly made friends. The new worker will likely frequent the same places as his/her co-worker friends. Since they live alone and don’t have a family to support, they will spend money in the economy and take on the same habits as their co-worker friends.
If they come with a family, they will most likely save more money to support their family. They will spend more time with their family and therefore fewer outings with co-workers will occur. This would likely last many years. This would be an immediate negative for GH.
Over time however, cultures become more homogenous and our tastes and habits become more similar.
Remember that GH offers an entertainment driven model and not a pure gambling model. While some people may be turned off by gambling, no one is turned off by food and entertainment. This is the reason I say we need to focus on our non-gaming activities. It will attract a broader group of customers. Once in the door, and over time, even the most puritan individual will likely try the slots for fun.
Rising shelter costs Rising home prices are only a problem if you are planning to buy. You are not turned off by this if you already own a home.
Economies go up and down. Prices of all assets rise and fall. This always was and always will be. GH does well in all situations.
In the short term, GH, like all businesses, will feel the impact of consumers having less disposable income. In the long term, it all works its way out.
Keep in mind my previous comment about Alberta residents being disproportionately invested in energy stocks relative to the rest of Canada. Those future very large dividend payments are very real. The increased prices of those energy stocks will create wealth. While expenses may increase in certain areas such as shelter, income will also increase as a result of energy holdings. There are two sides to all coins.