RE:RE:RE:Malx….the numbers guyTheBridge wrote: malx1, thank you for the doing the homework (plus corrections) and sharing it with us and since you mentioned that regular slot play turned into a bounus round I'm still "quickly waiting" for Gamehost's bonus round to start. Planning on checking out the Deerfoot casino this Friday afternoon and hoping that kasking hasn't depleted GH cash holdings to the point that they aren't able to make a substantial payout if I win a nice pot. Cheers!
Ya know, Bridge, in my recent rushed review of GH's quarterlies and Annual Information Form, I stumbled across something quite interesting that aligns quite accurately with some sentiment here in the GH discussion gruop...
From Q3 MD&A, page 16 for those who also dig into the details:
"Current debt instruments will be maintained or eliminated to the extent they allow for repayment. Debt maintenance includes regular amortized monthly principal payments, and intermittent payments on outstanding revolving debt instruments when surplus cash is available. Management's objective is to limit total debt to EBITDA (excluding lease liabilities) to a ratio of 2.0 to 1 or less until such time as opportunities encourage or conditions require a different strategy. The Company currently exceeds this ratio at 2.6 to 1, following the opportunity to purchase the Deerfoot non-controlling interest, but expects to be back to the objective range within one year of the purchase date." Let's go back in time. The AGM was last spring.
The consolidation of Deerfoot ownership was announced May 5th, 2022.
The AGM was held May 10th, 2022.
We knew back then that the current 1/2 dividend would allow for accelerated debt reduction, that GH's team targets a Debt-to-EBITDA ratio of 2:1 max.
Debt reduction was needed to pay for 9% Deerfoot consolidation.
We knew that if Endemic allowed for continuous operations of GH's properties, patrons will eventually feel the urge to partake in Entertainment and Lodging; meaning that we are likely to see some slow and steady acceleration of revenues for the business overall.
So here we are approaching Spring time again 2023. The Debt-to-EBITDA target is in sight.
Now the fun part.
BOD and management have a big decision to make:
What is the best use of surplus capital once debt target is reached?
1. Continue to pay down debt?
2. Buy back shares?
3. Increase the dividend?
4. Capex? No, this is ALL DONE!
-----------------------------------------------------------------------------------
Here's my take, for those how care to listen.
We all know the share price is ridiculously CHEAP.
Cpeczek and I say, when you can buy $1.00 for $0.66, that's a good deal.
In this case, $8 share price reflects the general stock market malaise.
How do we get the shares to $12?
Simple.
Shore up an additional 1,000,000 shares or more, then watch per-share earnings metrics improve from NCIB and increased revenues.
Higher net earnings per share will boost the share price.
Higher cash flow per share will boost the share price.
Higher free cash flow per share will boost the share price.
We are at 22,400,000 shares outstanding today.
What would the cost be to retire another 1,000,000 shares?
I'd wager it can be done for $9,000,000.
So rather than pay out $8,000,000 through a doubled dividend; HOLD OFF on HIKES, and set out to buy back another 1mm shares.
Something fascinating will take place.
Remove the shares from weak hands and you will see the share price eventually strengthen.
The above process would take another 12 months, meaning a dividend hike would be delayed until GH can pay back the $9,000,000 borrowed for NCIB.
At the end of the transaction, if the regional economy is in average health, GH will be very, very well positioned to Double the Dividend.
Just my take.
I know many others want dividend hikes immediately, yesterday I get that.
But that's not how business works.
Business does not care about my desire for higher dividends.
We do what's best for the integrity of the business, and the share price will eventually follow.
If you build it, they will come. Isn't that what they say in Field of Dreams?
In this case, if you buy back another million shares, the rally in share price will take place.
Let's look at this from a different perspective:
If you forego a dividend hike of $8mm, you can buy back $9mm worth of shares, and you can watch your existing shares increase in value from $8 to $10, maybe to $12 and then higher once the business announces the eventual Dividend Hike.
In the end of this chatter, you gotta ask honestly ask yourself:
Which of the two options are more attractive?
A. Double the dividend and receive 4.6% cash yield on your shares along with maybe 25% share price appreciation for total return of 29.6%
OR
B. Spend $9,000,000 on NCIB, mop up the shares from short-term thinkers, help blase the trail to a $12 share price; and through those efforts we ideally see a $12 share price that represents 50% capital appreciation plus half dividend, total return of 54.6%
29.6% return or 54.6% return?
We will find out with time.
Maybe the NCIB is constrained by lack of sellers. If that's the case, then BOD and team will opt for dividend hike. Decision will be easy.
No matter the outcome, the business assets are in good shape exiting the Endemic.
Many years of entertainment and lodging ahead.
Good time to be had by patrons.
Doors will be open to host.
Cheers gang
Good group of people here, I hope we all do well with these GH shares.
Odds are in our favour. Hang in there.